spending

S5E1: Overspending? Here’s How to Get Your Spending Habit Under Control This Year

Financial Finesse Podcast / By /
Spending Habit

Take Control of Your Spending Habit Once and For All

In this episode, Cathy shares her tips and strategies for getting your spending habit under control once and for all this year.

Welcome to Episode 1 of the 5th season of the Financial Finesse podcast!

Today I’m going to talk about spending—specifically, how to get your spending under control. Many of my clients told me that one of their goals for 2023 is to get their spending on discretionary items under control. (In other words, the things you really don’t have to have.)

And they may not have a spending problem per se. But they know their spending is probably one of the things that’s keeping them from reaching their longer-term financial goals, and/or it’s just making them uncomfortable. They don’t feel right about their spending habits.

I have to admit, I can relate to this because I have a little bit of a clothing infatuation. I love anything new, and I love clothing and accessories. So, I’m going to be right there with you in working on getting my own spending habit under control this year.

Episode Highlights

  • [02:11] What do habits have to do with spending?
  • [03:23] Identifying your biggest spending weakness or weaknesses.
  • [06:05] What are your spending triggers?
  • [08:45] Setting your new budget for the year ahead.
  • [10:32] How to find ways to support yourself in reaching your goal.
  • [16:23] Determining your values and aligning your spending accordingly.
  • [17:33] Download our free e-book, How to Take Control of Your Spending This Year.

Links Relevant to this Episode

How to Take Control of Your Spending This Year Blog Series:

1: Reduce Your Spending By Creating Healthy Habits

2: Identifying Your Spending Weakness

3: What Triggers Your Overspending Habit?

4: Budgeting And Tracking Your Spending

How to Take Control of Your Spending This Year (Free e-book)

The Happiness Spreadsheet (Free e-book)

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How to Take Control of Your Spending This Year, Part 4: Budgeting and Tracking Your Spending

Budgeting Help, Women and Money / By /
Budgeting and Tracking Your Spending

This article is part four of a four-part series to help you reduce your spending this year. In part three, you identified what triggers your overspending habit. This week, I’ll share tips and tricks for budgeting and tracking your spending.

Budgeting and tracking your spending can provide benefits beyond simply saving more money. It also allows you to invest more, pay off debt more quickly, and even retire earlier in some cases! Plus, it can offer a sense of control and accomplishment and reduce financial stress.

Setting a New Budget

Previously, you identified how much you spent in the last 12 months on your spending weakness. Now, it’s time to set a new budget for the next 12 months.

Of course, it’s helpful to choose your new spending goal within the context of a comprehensive cash flow and financial plan. However, to keep the task smaller and more doable, I suggest setting a budget of at least 25% less than you spent the previous year on your spending weakness.

For example, if you spent $10,000 last year, set a budget of $7,500 for the next 12 months. Reduce by a more significant percentage if you feel like your spending was way out of control last year!

Depending on your spending weakness, it may be helpful to set a monthly budget instead. For example, if clothing is your weakness and on average you spent $1000 a month last year, your new budget will be $750 a month. Setting a monthly spending limit rather than a yearly goal may help you stick your budget longer term.

Tracking Your Spending

Once you’ve decided on an amount, you need to create a system for tracking your spending.

You can accomplish this task either digitally or manually; the most important thing is that you do it on at least a monthly basis. If you wait until the end of the year, you lose the benefit of being able to modify your behavior if necessary.

One idea: Save all your receipts in a folder (online or physical). Then, at the end of each month, add them to a spreadsheet and subtract the total from your total budget. Another idea is to download an app like Mint or Goodbudget that tracks and categorizes your spending.

How to Stick to Your New Spending Plan

Budgeting and tracking your spending are indeed important steps. Yet it takes focus, patience, and perseverance to actually stick to your new spending plan.

In other words, changing your behavior is hard. To get your spending under control once and for all, you’ll need a set of tools and resources that support you in achieving your goal.

Here are a few ideas for changing your behavior and creating new, healthier habits:

  • Find a replacement activity for shopping. When you think about going to a store or hopping on the internet, read a book, call a friend, or watch a movie instead. Choose something pleasurable and stimulating that doesn’t cost money.
  • When you go to a store, be prepared. Make a list of what you want to buy and stick to it. This preparation will help you avoid impulse purchases.
  • Delay your purchase. Take a day or two to think about whether you need it.
  • Avoid peer pressure. Don’t shop with friends who encourage you to buy things you don’t want or need.
  • Don’t tempt yourself. Plan different routes when you are out and about to avoid your favorite stores and unsubscribe from email lists that entice you to spend money.
  • Find a new hobby that doesn’t involve spending a ton of money. For example, play a new sport, start a creative project, or learn to play a musical instrument or speak a new language.
  • Keep your goals front-of-mind. Add a sticky note to your laptop with your budget goal, or read books and articles or listen to podcasts or audio books about habits, conscious spending, and personal finance.
  • Practice self-awareness. When you are angry, tired, sad, or frustrated, go for a walk or meditate instead of shopping. Keep a journal about your experience and emotions while trying to change your behavior.
  • Repurpose your discretionary funds. Take some of your savings and donate to your favorite charity.
  • Hold yourself accountable. Tell your friends that you are trying to cut back on your spending and want their support, or hire a coach or financial advisor to help you reach your broader financial goals.
  • Visualize your future self. Think about what you’ll gain if you get your spending under control. Then, create a vision board depicting what you see and how you feel.

What Will Motivate You to Stop Overspending?

In addition to changing your behavior, you may need to adjust your mindset around spending altogether. Otherwise, it’s easy to slip back into bad habits.

One thing I’ve found helpful when trying to create a new habit is to identify my “why.” In other words, why is it so important to you to get your spending under control? What are you giving up by overspending? What’s the opportunity cost?

Some of you may want to retire early, but your current spending is keeping you from doing so. In effect, your spending habit may be keeping you from spending more time with your family, pursuing your lifelong dream of writing a novel, or just feeling more at ease on a daily basis.

Or maybe your why is to get out of credit card debt. Instead of putting hundreds or thousands of dollars each month towards your credit card balances, you could be contributing that amount to a retirement account, HSA, or donor-advised fund. You may also sleep better at night knowing you’re debt-free.

Take time to journal about what why you want to stop overspending and what it would feel like to get your spending under control. Then, ask yourself these questions: What would I do with the time and money I save? What could I accomplish instead? How would my attitude about myself change?

Budgeting and Tracking Your Spending for the Long Run

Lastly, people tend to be motivated by what they value. Ask yourself if your current spending aligns with your values. If not, this can be a powerful motivator when it comes to budgeting and tracking your spending.

If you aren’t sure what your values are or need some prompting, consider downloading The Happiness Spreadsheet. This free eBook is full of exercises to identify your values and align your spending with what matters most to you. It also has a list of other helpful resources to guide you in getting your spending under control.

If you’ve been following this blog series, I hope you now have a strong foundation to create healthier spending habits in 2023 and beyond. You may also find the other resources on my website helpful as you continue your personal finance journey.

Lastly, remember we’re in this together. Please feel free to connect with me, keep me posted on your progress, and ask questions.  

Good luck, and here’s to a prosperous 2023!

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

How to Take Control of Your Spending This Year, Part 2: Identifying Your Spending Weakness

Budgeting Help, Women and Money / By /
Identifying Your Spending Weakness

This article is part two of a four-part series to help you reduce your spending this year. In part one, I shared a simple hack to help you create healthier spending habits. This week, I’ll take you through an exercise to help you identify your spending weakness.

It’s common wisdom that the way to complete a big task is to break it down into smaller parts and then tackle each task one at a time. Otherwise, overwhelm can set in, and nothing gets done. I’ll suggest a similar approach to tackling the “big task” of overspending.

What Is Discretionary Spending?

We all spend money on a lot of things, necessary and discretionary. For this exercise, we’ll define discretionary spending as spending on items you could survive without if you wanted to.

Examples may include an extensive collection of clothing, art, household knick-knacks, jewelry, shoes, accessories, make-up, books, or electronics. Alternatively, you may overspend on discretionary experiences such as excessive travel, entertainment, or dining out.

First, Identify Your Biggest Spending Weakness

Your first task in cutting discretionary spending is to identify your biggest spending weakness. For example, if you feel shame (or at least discomfort) about the amount of money you spend on something, it’s likely your spending weakness.

Most of you know your spending weakness, so choosing will not be difficult. However, for those who need more clarification, analyzing your past expenses can help you find your answer.

I encourage you to choose only one spending category at a time to keep things simple. (Breaking down a big task into smaller tasks helps get things done, remember?) That way, you are more likely to make progress. Of course, if you want to, you can add more categories or items and follow the next steps for each.

Next, Calculate How Much You Spent Over the Last 12 Months

After identifying your spending weakness, the next step is to write down how much you spent over the last 12 months on this item. While you can estimate this dollar amount, it’s better to look at your credit card and checking account statements to determine your actual spending. Otherwise, it’s easy to rationalize and make excuses when you’re guessing.

Got your number? Congratulations. I know that confronting money issues is hard, especially if it brings up uncomfortable feelings like regret, remorse, or shame. So let the feelings happen, but then let them go. Thank yourself instead for starting this journey to get back on track.

Continuing Your Journey

In the next article, we’ll go through an exercise to help you discover what triggers your overspending.

In the meantime, I invite you to check out these free resources to help you better understand and take control of your personal finances.

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

If you found this information interesting, please share it with a friend!

Life After Lockdown: Creating a Budget Post-Pandemic

Budgeting Help, Women and Money / By /
Creating a Budget Post-Pandemic

For the past few weeks, I’ve been teaching a personal finance class at Mills College. The first class covered cash flow and budgeting, so I asked my students to create a budget for homework. To help them get started, I suggested reviewing their recent credit card and bank statements to estimate their discretionary spending habits. One of the students brought up a great point: “I wasn’t spending like I normally do during COVID, so the last 14 months may not be representative of my spending from now on.”

As it turns out, her statement is true for most of us. For example, 64% of Americans say their spending habits have changed since the pandemic started, according to a Bank of America survey of more than 2,500 adults. In addition, a separate Bank of America survey found that 46% of affluent Americans have been getting their financial lives in order during the last year and expect to reach key financial milestones sooner than their parents did. That means many of us not only changed how we spend our money, but we also developed more financial discipline during the pandemic.

Indeed, our spending will likely look different as the world reopens and life returns to normal. Of course, just how different depends on the person. It’s tempting to splurge on the things and experiences we missed most in lockdown (for instance, we finally have a reason to buy new clothes again!). However, I think it would be fantastic if some of us could maintain the money habits we developed when we had fewer options. Creating a budget that reflects those habits can be a great way to do that.

How the Pandemic Changed Our Spending Habits

Life in lockdown forced us to reevaluate many aspects of our daily lives. As our circumstances and priorities changed, so did our spending. Gyms and restaurants closed, and travel was all but nonexistent for the first part of the pandemic. So, where did our money go?

Self Magazine surveyed 1,300 Americans to find out how their spending habits changed during the pandemic. Of the female respondents, 62% said they used time in lockdown to cook more creatively and spent a lot more money on groceries as a result. In addition to our growing grocery budgets while at home, a CIT Bank survey conducted by The Harris Poll found that spending on food delivery was also up 25% during the pandemic. 

However, food wasn’t the only thing we spent more on in lockdown. According to data provided by budgeting app Mint last August, consumer spending on investments, pets, education, and home expenses was up significantly year over year.

While some of these trends may continue, others will naturally return to more normal levels in a post-pandemic world. It may be helpful to keep this in mind and adjust accordingly when creating a budget for the future.

Good Habits We Developed in Lockdown

Despite increased spending in certain categories during the pandemic, more than half of Americans said they spent less and saved more than usual overall, according to the same CIT Bank survey. Thanks to government stimulus and new spending habits, many people were able to save more and pay down debt.

Notably, CRS reported that credit card balances declined about $76 billion in the second quarter of 2020, the largest quarterly decline on record. In addition, data from Experian shows that on average, Americans’ credit scores increased and payment habits improved in 2020.

Yet good habits extended beyond those experiencing financial difficulties before the pandemic. Of more than 2,000 affluent adults (households with investable assets between $100,000 and $1 million) surveyed by Bank of America, 81% said they took the money they’d normally spend on entertainment, travel, and dining and set it aside for savings and emergency funds during the pandemic.

The Pandemic’s Impact on Women

These statistics certainly paint a rosy picture, and many of us have been fortunate enough to come out of the pandemic in similar or better financial shape than we started. Unfortunately, however, many women experienced unprecedented challenges during the pandemic, setting them back even further on their path to retirement.

For example, the U.S. Bureau of Labor Statistics reported women’s unemployment has increased by 2.9% more than unemployment among men since the start of the pandemic. In addition, data from Washington University in St. Louis showed hours worked by mothers fell four to five times as much as hours worked by fathers. Many women had no choice but to leave the workforce to care for aging parents or children. Female participation in the workforce has not been this low since 1988, according to one NPR analysis.

It’s no secret that women have long been at a disadvantage when preparing for retirement. This is because we tend to invest less and hold more cash than men, contributing to our savings shortfall. However, the main driver behind this shortfall is our lower lifetime earnings due to gender pay gaps and caretaking responsibilities—a trend that only worsened amid the pandemic.

Morningstar reports that 55% of all jobs lost in 2020 (2.3 million jobs total) were lost by women. And 32% of women ages 25-44 say they’re not currently working due to childcare demands, compared to 12% of men in the same age group.

If you’re facing any of these challenges yourself, creating a budget for post-pandemic life might be the last thing on your mind. However, closing the retirement savings gap is more critical than ever. Even one small step in the right direction can help you take control of your financial future.

Creating a Budget for Your Future

My suggestion to the student who spoke up in my class was to look back to 2019 as a spending guide. You may find this advice helpful as you’re creating a budget for yourself post-pandemic. However, if you want to continue the good habits you developed during COVID or create new habits to better prepare yourself for the future, be sure to incorporate these changes into your new spending plan. Remember: small, consistent actions over time often lead to big results.

If you’d like to work with a fiduciary financial planner to help you feel better about your money and prepare for the future, please schedule a call to see if we’re a good fit. In addition, you can check out The Happiness Spreadsheet, a fresh, inspiring approach to budgeting that can help you maintain good money habits and develop new ones.

If you found this information interesting, please share it with a friend!

Creating New Spending Habits After Shelter-In-Place

Budgeting Help, Cash Flow Planning / By /
Cooking At Home
One of the most desired and, at the same time, hardest-to-do financial tasks is to create a budget and stick to it. I know this from my personal experience and that of my clients. It is the rare person who enjoys purposefully creating spending limits – because that is what a budget does – it sets limits on spending. These limits are necessary to reach important savings goals like retiring or buying a house, but that doesn’t make them any more comfortable. What if there was an easier way to create new spending habits? Why not take this rare opportunity to create new spending habits instead of going back to the old? Admit it- you enjoy cooking more than you thought you did, and you can’t believe how much money you are saving by not eating out as much. You look in your closet and you are dismayed about how many clothes you own and don’t wear – and you don’t think you will need them after you no longer have to shelter-in-place. You’ve enjoyed neighborhood walks and Zoom Zumba classes much more than you ever liked going to the gym. If this is you – take the opportunity to build a new budget around this lifestyle. You don’t have to eliminate all past activities that you once enjoyed, but you may find it much easier to cut back now. Want to make budgeting more fun? Download The Happiness Spreadsheet, a free tool that helps you create a budget you can live by!
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Just Retired? 10 Ways To Keep Spending Under Control

Retirement Planning / By /

Just retired? Here are a few ideas about how to keep your spending under control. Does this sound like you?

You have just retired, and you’re exhilarated. Each day dawns with no schedule. You can sleep in or get up early. You can fiddle around the house all day or go out with friends. You can stay out late, enjoy another glass of wine and not worry about being alert for a meeting the next morning. You answer to no one but yourself (or your significant other).

You start to enjoy yourself. You start traveling to places that you have always wanted to go and you find wonderful treasures that you want to bring home. You go out to eat more often because you like being out of the house and you don’t have to get up for anything in the morning. You go to plays, concerts, and other live entertainment more often.

After about a year of pure fun, you want to feel productive. So you volunteer and donate your time and money.

You’re having the time of your life.

What Happens After the Honeymoon Phase of Retirement

Then, the credit card bills start to come in, and the balances due are large. You deplete a savings account and maybe have to sell some investments to pay bills. You start to get worried that maybe you’re spending too much. The stock market is in sideways mode, and you don’t see any growth in your portfolio. You realize it’s time to slow down and take stock of the situation.

If this all sounds familiar, you’re not alone.

It’s not uncommon for people to become accustomed to a certain standard of living or way of life. It’s not easy to adjust. It’s also not unusual to want to enjoy the new-found freedom that retirement brings. Yet, it’s a good idea to be aware and thoughtful about what is going on and try to bring things back under your control.

10 Ways to Keep Spending Under Control

Here are a few ideas about how to keep your spending under control:

  1. Presumably, when you retired, you had spending goals. At the beginning of each year, go back and check these assumptions to make sure you are still on track. If not, make adjustments in your spending.
  2. If you don’t want to cut back on your lifestyle, consider working part-time. Perhaps you can use your skills on a consulting or part-time basis.
  3. While traveling, consider renting out your home to bring in extra cash.
  4. If you have an appropriate space in your home, convert it to an Airbnb rental.
  5. Turn a favorite hobby into a business.
  6. Take more stay-cations. Be a tourist in your own town. It will save you on airfare and hotels, dining out and shopping.
  7. Reassess your need for new clothing and accessories. It’s likely that you don’t need as much now that you’re not going to a workplace daily.
  8. Consider selling items that don’t fit your new lifestyle at consignment shops or eBay.
  9. Let your friends know that you want to cut your spending back and ask for their support.
  10. Find things to do that don’t cost a lot of money.

Remember, sometimes the finest things in life are free.

Do you want to manage your money (and life!) better?

The Happiness SpreadsheetIf you want to think differently about the relationship between your spending, your values and your happiness, then sign up to get your FREE copy of The Happiness Spreadsheet.

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