Dealing with Overspending

Q: I am having trouble overspending each month. I’ve tried to budget but it’s too much work to track everything I spend. I’ll start but then give up in a couple of weeks. What can I do differently to have more success?

A: This answer starts with knowing how much you spend each month and how much after-tax money you bring in. But before you start worrying about creating a dreaded budget and tracking every nickel and dime per category, let’s look at a different approach.

My personal budget has two categories in it: fixed and variable. Fixed expenses are how much you need to spend each month to maintain your lifestyle. While variable expenses include what you are accustomed to having on hand to really enjoy your lifestyle, such as money for a fancy coffee. To keep track of my expenses I maintain a spreadsheet that lists out all regular the bills needed to keep a roof over my head, my family (and dog) fed, and gas in my car; while everything else is considered a variable expense.

Next, keep an eye on where you tend to overspend. Overspending tends to happen in one or two areas so rather than focusing on the whole budget, focus on the areas that are giving you trouble. Is it late-night online shopping tempting you with free next day shipping? A hobby that’s draining your disposable income or collection that’s gotten out of hand and is filling up a second room?

Forcing yourself to give up something you enjoy rarely works, but at times some recreational “triage” needs to take place. You can either replace it with something else that you enjoy that costs less, or if you decide the enjoyment is worth the money spent then set a maximum spend per month or even make a game of finding great deals for your hobby each month. Another tactic is to set aside a fixed amount of “fun” money each month that you can use freely for your favorite hobbies and activities. Having a set amount helps you to stay disciplined without feeling like a hermit wandering the fiscal desert of life as punishment for rampant overspending. In many ways having this set “fun” money could actually help you enjoy your hobbies and give your budget a much needed break as well, as things become predicable.

If you have more questions on this topic (and live in British Columbia) please contact us and ask about the Financial Planning, Investment and Insurance services we provide.