How to break free from the spending spiral

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Q: As we did our taxes and got receipts together for our small home-based business, we realized that we’ve spent thousands of dollars this year already on stuff we hardly remember buying. No wonder our credit card balances never go down. We both work day jobs right now and are building our own business on the side so that I can stay home with the kids as they grow up. I’ll start on mat leave with number three this summer so our household income will go down, which is terrifying if we can’t stop spending so much. We both feel pretty guilty about our finances right now and realize we need to make serious changes. Where do we start? ~Deborah 

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A: Overspending has become an epidemic in our consumer-driven society, leaving many people drowning in debt. The first step toward positive change when you’re feeling stressed financially is to acknowledge the issue. However, smart money management is about more than the mathematical and getting back on track is better viewed as a marathon than a sprint.

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What causes people to overspend?

Overspending occurs for various reasons, often driven by a combination of psychological, social, and environmental factors. Emotional triggers are powerful and when individuals feel stressed, anxious, or unhappy, they may resort to shopping as a coping mechanism. Retail therapy provides a temporary sense of relief but can result in impulsive purchases and subsequent buyer’s remorse.

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Social pressure and idealized lifestyles portrayed through social media impact spending behaviour. When individuals see others enjoying the latest gadgets, trendy fashion, or exciting experiences, they feel a sense of missing out. As a result, they strive to keep up with family, friends, and influencers by making similar purchases.

Being deliberate about your spending becomes even more difficult when you’re shopping with children or feeling fatigued. In such situations, it’s challenging to outsmart the clever marketing tactics aimed at influencing your spending decisions. Recognizing the physical limitations you face while shopping can lead to better decision-making, where understanding the emotional triggers and underlying motivations behind your spending choices can help make decisions more intentional.

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The Psychology of Spending — Money Habits and Overspending

Take steps to help yourself spend less

If you manage money with a partner and you’ve identified that overspending is a problem for one or both of you, join forces and learn how to build healthier money habits together. If you’re on your own, ask a close friend or family member to join you on your journey and help keep you accountable to your goals as you learn new money skills.

5 Relationship Red Flags When It Comes to Money 

Next, work on gaining self-awareness regarding your money patterns. If you aren’t able to identify what causes you to pull out the plastic as often as you do, reach out to a mental health professional who can help you gain the insights you need to manage the psychological aspects of spending.

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Once you know why you spend the way you do, it’s much easier to implement strategies to keep your money safe from yourself. Look for practical tips that you can implement right away. For instance, if you spend on takeout or eating out because you simply don’t have time to make meals at home, block time in your schedule three days a week to prepare your own meals. Create a meal plan, book time in your schedule to go grocery shopping so that you have the ingredients you need, and cook with leftovers in mind. Involve your kids in the meal prep and enjoy the time spent together in the kitchen. By turning takeout into a weekly treat rather than the norm, a family can save as much as several hundred dollars a month.

Instead of trying to keep up with the Joneses, focus on what’s most important to you. Set goals and determine how best to achieve them. Break them down into smaller, achievable targets to keep them from becoming overwhelming. Post pictures of goals where you can see them regularly or highlight inspirational quotes to help stay motivated. Consider setting an age-appropriate family goal to help your kids gain financial literacy skills along with you. Finally, don’t underestimate the value of talking about your progress and challenges with like-minded friends or family and celebrating your successes.

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What to Do When Your Goals Seem Unrealistic

Shop without overspending

When it comes to buying what you need, setting clear goals and shopping with a list helps prevent spontaneous purchases. For those used to overspending, do your research at home and shop with cash or debit wherever possible. Look for the best price and stick with only buying needs until your budget allows for the wants.

To help curb impulse buying, create a “buy list” of the things you want to buy but don’t necessarily need. A buy list is different from a wish list because it focuses on practical needs, whereas a wish list is about desires and aspirations. Consider using a buy list to vet your purchases before making them. If an item remains on the buy list for a predetermined period and you still want it, that’s your signal to explore ways to afford it. Buy lists and wish lists serve different purposes but both can be helpful in managing your priorities and goals.

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13 Money Saving Tricks to Pay Off Debt Quickly 

The bottom line on breaking the habit of overspending

Breaking free from the spending spiral once you’ve identified an overspending pattern, will mean staying committed to budgeting in a way that keeps you on track, accounts for paying off your credit cards and other consumer debt, and helps you save towards your goals. If outlining a complete household budget seems like an overwhelming task, start by tracking where you spend your discretionary funds. Work your way into a budgeting system that works for you and your family. If you’re struggling, reach out for help from a qualified credit counsellor sooner than later. Ultimately, create a system that works for you and avoid creating unnecessary barriers to your long-term success.

Related reading: 

How Much is a Lack of Financial Literacy Costing You?

Turning Resolutions Into Results, Don’t Miss Step 3! 

30-Day Savings Challenge 

Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.  

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