Overcome that overspending today

We’ve all been there. We get to the end of the week and realise we’ve got hardly any money left until payday, even though the budget said otherwise. We’re not even sure where it all went!

More than 1 in 5 New Zealanders admit to a constant struggle with overspending – buying things we don’t need. Turns out there are four drivers of overspending:

• Trying to change our lives (‘fantasy me’)
• Being disorganised
• Aiming to feel in control
• Caving in to social pressure.

Understanding these can help us all get our money under control.

Spending to change your life

Have you ever bought something, fantasising that it will change your life? That’s called ‘fantasy me’ overspending.

Advertising is partly to blame – the ad makers love to suggest that to become a better person, or to have a more interesting life, all we have to do is buy that item right now.

We often buy fancy clothes, art supplies or sports equipment because we want to be more creative, get fit and so on. But then we don’t use what we bought, because we lack the time, opportunity or motivation.

Here’s how to sort this out: The aspirations and needs that drive these purchases are usually good. It’s likely you want to make a change in your life. The problem is that you feel like the item you buy will make all the difference rather than the habits you need to change.

Think about how you can respond to your needs without having to buy something. Maybe you can rent the item, take a class or use what you already have. Then, after you have successfully incorporated the new activity into your life and built up a routine, you can reassess and buy that gear knowing you will use it.

Spending haphazardly

Then there's 'disorganised' overspending. Sometimes we just need to get organised, and until we do, we shell out more than we planned. The classic example is paying for takeaways because we didn’t manage to pack lunch.

Here’s how to sort this out: Review the last times you overspent because of not being organised enough, and set up a plan for next time. For example, if your overspending is food-related, consider stocking up on healthy snacks and use the weekend to make frozen meals for the whole week.

If you’re still getting takeaways no matter how hard you’re trying to be organised, try factoring it into your budget. Perhaps a $20 limit each week to grab pizza on a busy night will do the trick for making it easier to cook at home on the other nights.

Spending to feel in control 

‘Feeling in control’ overspending plays out like this – after a difficult day, we might impulsively buy something we didn’t plan to buy and, to be honest, we don’t really need. Often, these are things that make us look better (clothing, shoes, make-up), feel better (a massage or a beer) or promise to make our life easier (kitchen gadgets).

It’s not really the item that matters, it’s the feeling that goes with it – when we buy it, we are in charge, and buying is how we deal with negative feelings accumulated throughout the day.

Here’s how to sort this out: Find better ways of coping with stress that do not cost you money. (If you search for ‘self-care’, the internet will offer dozens of ideas.) Personally, I like to find a good podcast to listen to while walking in the park.

Spending because everyone else is

Social overspending typically happens in two ways. We go out with friends – for drinks, a bike ride, a sports event – and end up spending more than planned because everyone else is. Or we buy things just to impress our friends or keep up with them.

Relationships are important, but if social overspending delays our goals – like getting on the housing ladder or paying off debt, it’s probably not worth it in the long term.

Here’s how to sort this out: If you’re dealing with the first scenario – spending because everyone else is – set yourself a budget for the day and stick to it. Maybe you can afford lunch after the bike ride, but you can’t get drinks as well. That way you’re still participating in the social event, but not blowing your budget. Allowing yourself to enjoy your money and the experiences it can bring helps you not feel deprived and makes it easier to resist the urge to overspend.

If it’s the second – wanting to impress your friends – remind yourself of why you like them. I’m sure it’s nothing to do with the things they have and how much they spend, and more to do with the kind of people they are. It’s highly likely they feel the same about you!

If you find yourself on a stricter budget than your friends and you’re overspending to keep up with them, try chatting to them about it, explaining that you’re working hard to stick to a budget and suggest some cheaper (or free!) things you can do together instead.

It’s very likely they’ll be quick to support you, and you may even find that they’re experiencing the same thing – spending more because they think you want to.

If all else fails, find new friends! (Just kidding.)

Don’t beat yourself up

Overspending happens to absolutely everyone from time to time. Work to identify why it’s happening so you can overcome what’s causing it. And if you can, factor a bit of spending money into your budget so you can still have some fun without breaking the bank.

Celestyna Galicki is former Research Lead at Te Ara Ahunga Ora Retirement Commission, where she crunched data and kept across the research on how to be better with money.