How to Stop Overspending Each Month

How Do I Know I'm Overspending?

If you think you may be overspending, track your expenses for a month. Gather up your recent debit and credit card statements, along with any receipts you have for cash transactions. Using a paper and pen, spreadsheet or money-tracking app, divide your expenses into categories: groceries, housing, utilities, dining out, clothing, savings, car and any other grouping that makes sense to you. Total up each column to see how much you spent over the month.

Clues you're overspending include:

• Running out of money: Your paycheck isn't due for another week, but you're already out of cash. Routinely running out of money is a clear sign that you're spending more than you should, either on extras or necessities, or both.
• Tapping your savings: Although your emergency fund exists to cover unexpected expenses, it's unusual to have an emergency every month. If you're using your savings regularly, it may be time to recalibrate your spending.
• Charging up credit card balances: Similarly, using credit cards to make ends meet is a signal that your regular income isn't meeting expenses. If you can no longer pay your balance at the end of the month, consider looking for ways to cut back.

How to Stop Overspending Each Month

Here are seven tips to rein in spending, whether you're regularly going over budget or trying to resist impulse buying.

Identify Reasons for Overspending

Sometimes, you know where the money went. You bought an e-bike, daily delivery lunches, a new gaming system, podiatrist-recommended running shoes and cultured butter from Normandy, France.

Other times, your spending may have changed due to rising prices or other factors outside your control. Maybe you got a job 20 miles from home and have to pay more for gas and car maintenance. Maybe your toddlers have grown into hungry tweens. Or perhaps you've lost your job or given up your side hustle and now you need to spend less.

Track your expenses and try to differentiate between spending that's behavioral (and therefore avoidable) versus necessary. You may want to cut back on unnecessary purchases. Where spending is essential, but possibly getting more expensive, you may need to accommodate it by reducing costs in other areas.

Tip: Tracking your finances with a budgeting app can help keep you up to date so you always know where you're spending by category.

Create a Budget

If you don't have a budget yet, use your tracked expenses to sketch one out. A formal budget can help you get a firm grip on your income and spending, but even a broad accounting is a good place to start. Here are four questions that might help:

• What was your actual net income for the month?
• How much did you spend in total—cash, debit and credit transactions?
• Did your expenses exceed your income? By how much?
• Are there categories you can readily cut back on?

In some cases, overspending isn't the issue. You may have lost your job or had your wages reduced, or you've had emergency medical expenses pop up that decimated your budget. When financial concerns go beyond simply spending too much, it's important to consider other options. For instance, financial assistance services may help connect you with programs like government benefits, rent relief, legal aid and food assistance. You may also want to talk to your lenders about deferring payments.

Learn more: How to Make a Budget

Remove (or Reduce) Temptation

Where you can, try to curb discretionary spending. If you need an extra measure of motivation or discipline, consider these tips:

• Shop with purpose. Use a shopping list at the supermarket and don't browse shopping sites if you're tempted to buy.
• Do a no-spend challenge. Try not to make any discretionary purchases for a week or a month, or cut off your spending in a single category: no beer this year, for example.
• Try the 24-hour rule. Wait at least 24 hours before making unplanned purchases. You might find the impulse to spend will pass.
• Turn off social media. Take a break from social media influencers, or make a rule that you won't purchase products you see promoted on TikTok or Instagram.
• Use the envelope method. Withdraw cash to cover your spending for the month and divide the money by category: groceries, entertainment, clothing, and so on. When your cash is gone, it's gone. Or, save up your leftover cash for future spending.

Cut Monthly Bills Where You Can

You can't eliminate recurring bills like rent or mortgage payments, utilities or phone plans, but you may be able to economize. Here are a few opportunities to explore:

• Utilities: Cutting energy consumption is always a worthy goal. Use appliances less often, turn lights off and set the thermostat to a slightly less comfortable setting. Also consider switching to low-energy lightbulbs and appliances: They may save you money on utilities, though they'll also cost you upfront.
• Monthly phone and internet charges: Can you reduce your service level without suffering? If so, consider a more budget-friendly plan.
• Insurance: Shop your home or auto policy to see if you can find a better rate. You may be eligible for a multipolicy discount if you have more than one policy with the same carrier. Experian's insurance marketplace could help you find comparable car insurance for less.
• Credit cards: Bring your monthly payments down by paying off debt and resisting the urge to charge. Also explore whether debt consolidation might lower your monthly bills.

If your monthly budget feels out of whack no matter how much you recalculate, take a closer look at your housing expense. Rent or mortgage payments can take up so much of your budget that there's barely any money left to live. Though moving is a big decision, you may want to consider finding more affordable housing or refinancing the home you own if your housing expenses are weighing you down.

Learn more: What to Do When You Go Over Budget

Unsubscribe

Subscriptions, memberships and apps are easy to sign up for and even easier to forget about. Look through your phone, debit and credit card bills for recurring subscriptions and cancel any you don't need or use. Common suspects: overlapping streaming service or cloud storage solutions, paid podcast subscriptions and gym memberships. Also look for opportunities to share subscriptions with family or friends.

While you're at it, unsubscribe from marketing texts and emails you don't want or need. Your inbox and notification screen will thank you.

Limit Spending on Credit Cards

Credit card debt can be difficult to pay off, and interest charges only add to ever-growing monthly card payments. To make matters worse, it can hurt your credit scores to max out your credit cards or use up a large percentage of your available credit.

If impulse credit card purchases are affecting your finances, stop carrying your cards with you and storing your card information in your web browser. By adding this small barrier, you give yourself time to decide whether you really need to make that purchase.

Tip: Do you switch to credit cards when you're concerned that your checking account balance is low? Try checking your account balance every morning. You'll have a clearer picture of how much you have left to spend at all times—and maybe remind yourself to spend less and save more if your balance is low.

Learn more: How Budgeting Can Help You Improve Your Credit Score

Automate Your Savings

Pay yourself first by sending your money directly to savings, before you have a chance to spend it. Ask your employer if they can split your direct deposits between two accounts (checking and savings), or automate your bank accounts to route money to savings as soon as your paycheck hits.

What Are the Consequences of Overspending?

Over time, overspending can put your personal and financial well-being at risk. Here are a few red flags to watch for:

• Financial vulnerability: Spending down your savings and running up your credit card balance weakens your overall financial position. Overspending makes it harder for you to cope with emergencies or meet your financial goals.
• Debt overload: When costs are on the rise, using your credit cards to cover the gap feels like a simple solution. But if you can't pay your balance in full each month, you may eventually find yourself in explosive debt.
• Damage to your credit scores: About 30% of your FICO^® Score^Θ is based on credit utilization, or the percentage of your total credit lines being used. Higher credit utilization tends to lower your credit scores. And higher credit card balances can put you at an increased risk for late payments or default—and even more credit damage.
• Stress, anxiety and relationship strain: Worrying about money and, worse, dealing with budgetary shortfalls can take a toll on your mental health and put strain on your relationships.

Making Your Finances Sustainable

Finding the right balance on spending is an ongoing challenge. Economic ups and downs, lifestyle changes, your sister's wedding—these can all trigger unexpected spending. The goal isn't to eliminate life's financial surprises; that isn't possible. Instead, creating structure and a long-term plan helps make your finances sustainable, in good times and bad. As you go, monitor your credit to stay on top of your credit file, so you'll be financially informed and prepared for new challenges ahead.