Attempt to reduce overspending by minimizing use of credit cards and making coffee at home. (Photo by Molly Rippinger)

Creating a budget for yourself and your family is an important step toward being financially stable. One factor that can significantly impede your efforts toward financial stability can be the bad habit of overspending.

“There are probably as many reasons why we overspend as there are reasons why we shouldn’t,” said financial advisor Jocelyn Black Hodes of DailyWorth. “The first step in changing our behavior is to recognize the triggers and to consciously confront them when we’re tempted to give in.”

It can be difficult to set boundaries for your spending, but identifying the areas where you overspend will have a positive impact on your financial status. Hodes offers some of the most common reasons for overspending and how to address them.

Spending what you don’t see. Using credit cards instead of cash makes it easy to overspend. When you don’t physically see the money leaving your wallet, your money has a tendency to disappear much faster. Try taking out enough money at the beginning of the week to last you through your weeks’ expenses. If you happen to overspend one day, you’ll wind up having to make up for it the next.

Living beyond your lifestyle. Earnings have a habit of increasing and decreasing as life goes on; if your salary has taken a hit, it may be difficult to change your living habits with your finances. Set a goal for yourself now to live below your means and have adequate savings set aside (approximately six months worth) so you have a comfortable cushion should something unexpected occur.

Compensating for a poor childhood. Individuals who may have grown up feeling deprived can sometimes compensate by overspending as they become adults. Seek out positive financial advice from trustworthy sources so that you can be a good role model for others. You can still enjoy the finer things in life, but enjoy them in moderation and within your means.

Indulging in emotional spending. When people are unhappy, they tend to go on a shopping spree to make themselves feel better. While shopping and buying fun things can be an effective distraction, it will not solve the underlying problems that are causing you to be unhappy. Identify the reason for your emotions and deal with them directly so that your wallet doesn’t suffer as well.

As Harriette Halepis, of Mint Money Management, explained, “To stop overspending, you have to realize that you are overspending to begin with.”

Taking a close look at your expenses to identify where you are overspending is crucial to making a change in the right direction. Here are some of Halepis’ tips:

Cut the coffee. Instead of stopping for a coffee every morning, try making your own before you leave the house. The average coffee costs between $2 and $5. If you stop for a cup every day of the business week, you’re averaging upward of $1,300 a year just on coffee.

Don’t waste electricity. If you run your air conditioner or heat when you’re not at home, you’re increasing your electric bill. Invest in a thermostat that has a timer so your heat will automatically go down on the days when you’re away.

Limit the lavish living. You don’t have to completely cut out all the fun things in life, however, it is important to not go beyond the budget that you set for yourself. Dine out, but less frequently. Save up for something special that you’ve really been wanting instead of just buying the newest thing on the market.

Identifying the areas in your life where you habitually overspend and finding ways to reduce your spending will help you better maintain your financial stability. It’s important to remember that you don’t have to cut out the things you enjoy entirely; modifying those things to fit your budget means you can still enjoy them without putting a dent in your wallet.

For more information on how to avoid overspending, contact Kate Knox from North Shore Bank at 262.797.3323.