Overspending isn’t always the result of carelessness. It’s easy to let emotions drive spending, which can hinder sound financial choices and lead to a negative mental or emotional state.
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Don’t let the possibility of guilt hold you back from moving forward to improve your financial situation and achieve your goals. Here are five ways to not only recover but bounce back from a financial hangover.
Transparency is key when assessing the “why” behind a financial hangover, not judgment. Now is the time to sit down and review everything, leaving no stone unturned. Gather all of your receipts, credit card statements and bills. Doing so helps you identify what you have spent.
Guilt isn’t the end goal. Rather, information is the desired result, as it empowers individuals to initiate change.
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Once you know what you’re spending, it’s time to stop the bleeding. Review your budget to identify areas where you can make cuts. First, identify any services you can eliminate that derive minimal value.
Streaming services are one example, as the average American spends $69 monthly on subscriptions, according to Deloitte. Cut what you don’t watch to free up cash. Rinse and repeat for other services or subscriptions that you don’t truly need to help regain control.
If you have high-interest debt, make it a priority to begin attacking it to reduce interest charges.
People spend money for different reasons, but one key factor that can easily drive overspending is emotions. Money and emotions are often closely linked, and if you don’t understand what drives your spending, it can lead to unwise decisions.
Identifying spending tendencies is vital to establishing a good money mindset, according to Rachel Cruze. For example, if spending time online causes you to overspend, consider reducing time online or removing your credit card information from retail sites you frequent.
Having a fully funded emergency fund is one of the best tools to avoid high-interest debt. Most experts recommend having at least three months’ worth of living expenses saved for emergencies.
That amount may feel overwhelming, but don’t let it stop you. Many high-yield savings accounts have low minimum balance requirements and allow for automated transfers. Set a goal to save $500, then $1,000, and use that momentum to reach three months’ worth of savings.
