Here’s a scenario common to households: You go to make a purchase and you find yourself without enough funds in your bank account. If this is frequently happening to you, it may be an issue with overspending.
There’s good news, though. With the right information and a goal in mind, you can take control of your financial situation. That starts with learning the signs that you are, in fact, overspending. Let’s look at nine clear signals it’s time to reign it in.
You don’t know how much you spend each month
You’re not alone; most Canadians have no idea how much they spend. Two major culprits of disappearing funds? Impulse purchases and going out. The average Canadian spends $184 a month just eating out, amounting to over $2,000 a year. For the 59% of admitted impulse shoppers, they annually spend $3,720 trying to cheer up.
Not overspending doesn’t mean staying in every night and avoiding the sales section. It means figuring out what you are spending money on and staying within the confines of a budget. Speaking of budgets…
You don’t have a budget
If you don’t know how much you have to spend, how do you know how much you can spend? For 63% of Canadians, they get through each month without a budget but say they have more debt than five years ago. It’s clear that having a budget is key to avoiding overspending.
Creating a budget can be intimidating and time-consuming but you only have to do it once and make tweaks to it as life changes take place. There are many free tools out there to walk you through the process of developing a budget that satisfies your personal situation.
You’re hiding purchases or hedging actual costs
Many of us are guilty of totalling costs by rounding down to the nearest dollar rather than rounding up. An item that costs $10.49 before tax suddenly becomes an even $10 to your friends. A poll, split by age, showed that 37% of people under 50 and 22% over 50 have hidden a purchase or lied about the cost. Another poll found that 30%of people are hiding at least one financial secret, like spending habits, debt, or monthly expenses or bills.
You don’t have to start telling everyone your entire financial situation but being honest with yourself will go a long way towards taking control of your spending. Before you know it, you won’t even feel a twinge of fear when looking at your account balance.
You rely on your tax return or bonus as part of your budget
There are two times a year many of us anticipate: Tax season and holiday bonus season. We often lean heavily on these as cash windfalls that will help us pay off our credit cards or buy holiday gifts. But some suggest that holiday bonuses may be on the decrease. And with ever-changing tax credits, you may not have the same opportunities for tax breaks as you did the previous year.
Relying on one-time bonuses or tax breaks to cover big costs can be risky and is often a red flag for overspending the rest of the year.
You don’t have any emergency savings or retirement fund
Even if you do have an emergency and/or retirement fund, maybe you haven’t contributed to either for a long time. Again, you’re not the only one. Last year, we saw our collective savings rate drop from 5.3% to 4.3% in just a few months – and for decades, the savings rate has been low in households across the country. This lack of savings is likely driving up debt in the form of expensive credit cards and dips into home equity, to name a few.
For a lot of us, saving can be a difficult, if not impossible, task. Starting small, though, will help you put some money away without taking away from your lifestyle. For example, by saving only $3.00 a day, in one year you will have a safety net of over $1,000.
You can’t pay off your credit card balance each month
Depending on what you use your credit card for, there is no clearer indicator of overspending than frequently carrying a balance. This is also true if you are only able to make the minimum required payments each month. As credit cards more frequently become the go-to choice for making purchases, overspending will become even easier.
High-interest credit cards can quickly become unmanageable, so limit the situations in which you use them. Simply put, don’t use them to buy anything you cannot afford.
You are pinching pennies by the end of your paycheque cycle
The cost of living is increasing yet our paycheques aren’t. Because of this, our buying power has suffered and suddenly we are down to a few dollars in our account and too many days away from the next cheque.
End the cycle by finding creative ways to save money on necessary purchases, and you just might find that you are overspending in places you don’t have to.
You Pay Your Bills Late
No one gets excited about paying their bills late. It’s stressful, costly, and can result in loss of service if the due date gets far enough away. A forgotten bill here and there is not the same as repeatedly struggling to cover your bills each month, another sure sign you are overspending in other areas.
Besides reviewing how you overspend on unnecessary purchases, consider looking into how to lower your monthly bills – such as conserving electricity or weather-proofing your house to better maintain interior temperature or cutting your cable TV cost for cheaper streaming services.
You have more debt than income
For the average Canadian, every dollar of income is met with $1.69 of debt, up two cents from around this time in 2017. Increasing debt is in part because of stagnant pay raises but it’s also from overspending on items we just simply can’t afford.
Digging out of a hole can be a difficult process, but there are a few essentials to eliminating debt that doesn’t take a lot out of you.
Overspending is a challenge for many Canadians across the country; you are not alone in your struggles. Reigning in your spending begins simply by being aware of doing it – and then taking steps to address it. As you go about this process, Speedy Cash Canada is here to help with a payday loan should you need any short-term assistance, and by sharing constructive financial information to guide you on your way!