Overspending can be SO EASY right…?!

“Live in the moment! YOLO! I can pay it back later right? Who needs to save for retirement, a house, a car, a holiday or an irregular shock…. right…?”

Well, yes… but also NO!

With so much in our lives being so easily accessible, we can be thinking of something we might want to buy and it can be in our homes the next day and we don’t even have to get up for it… and this makes it hard to resist the instant gratification in buying something.

The thing is, as a species it is so hard to have “self-control” and to override the chemical boosts we get from buying something because it makes us feel good. We are literally wired to gravitate towards actions that bring us pleasure and stay away from things that cause us pain because, not so long ago in our history, we relied on these things to SURVIVE.

So… take the willpower out of it and do some forward planning.

I know… I can hear your eyes rolling as you read this but spending just 30 mins of planning followed by sticking to that plan and following THE PROCESS, you can safeguard yourself to never overspend on anything ever again.

The Process:

What is the cost of your essentials?

1. Look through all of your expenses over the last month (or pick a typical month if last month wasn’t a normal spending month for you) and categorise all of your essential life expenses. Put them in to an excel table with the item on the left, and the monthly cost on the right.
   1. Essential (Phone, fuel, all household bills, food, car tax, car insurance, car payments etc…)
2. Add up the value of these expenses (if you don’t have exact figures then make an estimate for now but be honest with your estimate).
3. Subtract these essential costs from your total monthly income.

Doing the above will give you an idea of the things you NEED to spend on a monthly basis and will also tell you how much you have left over for EVERYTHING ELSE (Holidays, week-ends away, a new laptop, a new phone etc etc…)

Split the difference:

Next in the process is to split up the funds you have left in to other categories of things that are important to you (Saving for a house, money for fun things, money for investing, saving up for holidays…).

Now open one bank account (with NO OVERDRAFT) for each category (this is very easy to do, can be done online AND you can even name the bank accounts differently according to what they are going to be used for).

When the debit cards arrive CUT THEM UP and throw them away (Except the one you are going to use for fun things / outings). This is to resist the urge to just spend from that card.

Now every time you get paid, put the required amount in to the “Essentials” account, and split the rest among the various saving accounts you just opened.

Stick to the plan:

Now, for the magic!

Don’t over-spend from any of those accounts.

That’s it. If, based on what you have allocated, you can save £100 per month for “fun / outings” then you will have only that to spend on that each month. This FORCES you to make decisions on what to spend your money on and you can’t just go out on a bender every week end.

This may seem like a chore, but if you want to stop over-spending then this is what you have to do.

Streamline:

Putting all of your expenses in front of you and having to allocate them in to a category also shows you WHAT you spend your money on. If you feel you want to save more money, then you have to remove something from one of the categories altogether (do you have Netflix and Amazon prime and Disney + and Now TV? – and do you NEED to have all of these?)

A final thought:

Try to steer clear of loans for things that depreciate like Cars, Holidays etc because you end up paying more for them in the long-term.

AND if you can afford to pay back a loan at £150 per month to pay for that holiday, then you can save £150 per month in advance of taking that holiday.

The fact that it is a loan FORCES you to pay it back and FORCES you to make a decision on something that you have to go without to pay that money back. So do it the correct way around, save up and then spend.

Further reading:

Here are some of the best books I have read when it comes to managing personal finances if you want to dive deeper in to this topic:

1. Secrets of the millionaire mind – By T.Harv Ecker
2. The richest man in Babylon – By George S. Clason
3. Money – By Rob Moore

Forward on / Get in touch:

If you think this post can help someone then please forward it on to them. The recommended reads section on the main website has additional resources that you can use to find out more information on this topic.

As always please let me know if you have found this helpful or if you’d like clarification on anything in this post. I want to make these valuable to you the reader so you can have practical ways to improve your life. Thanks, Alex