There are several compelling reasons for you to learn how to quit spending money.
Perhaps not how to stop spending money entirely, but understanding how to spend less in specific areas might help you achieve your financial objectives. Whether it means saving more, investing more, or better preparing for retirement.
Regardless of your motivation, resolving to attempt to spend less money is an excellent first step toward improving your budget and personal finances in general.
The issue with overspending
Overspending is a major issue in the United States today. According to Debt.org, overall consumer debt is approaching $14 trillion, with the typical American carrying more than $8,000 in credit card debt.
These are two intimidating figures, and extravagance is largely to blame.
To put that in context, $14 trillion in consumer debt equates to an average American home owing about $110,000!
Overspending is defined as spending more money than you expect or have.
In my opinion, there are two major difficulties that allow overspending:
Social media and other news sources have normalized expenditures and muddled the difference between being affluent and wealthy.
Many consumer instruments, such credit cards, make it very easy to go into debt.
The combination of the two criteria above boosted the urge to overspend while also making it simpler to do so.
We’ll go over some ways to help you stop spending money and become more financially responsible.
How to Stop Spending Money: Ten Ideas to Consider
1. Begin with a Budget.
The first and best way to avoid overspending is to create a budget. Even if it is only a high-level budget.
Create a High-Level Budget
A high-level budget has three key buckets:
Income, Expenses, and Savings
You must comprehend how much money you get in (income), how much you spend (expenses), and how much money remains to save and invest.
If you are dissatisfied with how much you save each month, or if you aren’t saving at all, you should either boost your income or cut your spending. Or a blend of the two.
If you’re not sure where to start when it comes to cutting spending, you could create a more precise budget.
Create a Detailed Budget
Creating a thorough budget entails keeping track of all expenses.
Yes, for every single cost.
There are several apps that can aid with this, but a good old-fashioned pen and paper would also suffice. Tracking every dollar you spend will show you where your money is going and provide you suggestions for how to cut back on spending.
For additional information on how to create a budget, check out our guide.
No matter the budgeting method you use, it is typically the first step in controlling your expenditure. It is difficult to reduce spending or enhance your personal finances if you do not know where your money is going.
2. Automatically reduce monthly expenses
Aside from decreasing spending, you may also lessen your present expenses.
For example, you may be able to negotiate reduced monthly payments for phone, internet, cable, and other services.
And if you’re concerned about having to phone all of these suppliers and negotiate on your own, don’t worry; there are services available that can do it for you. Trim is my personal favorite, but you may also check out
Billshark & Truebill
Trim will contact your service provider on your behalf and negotiate a cheaper rate for your current service. Trim’s website claims that it has saved its subscribers more than $40 million!
Trim is compensated by taking a part (33%) of the money saved for you, but only if they are successful.
If Trim saves you $100 each year, you’ll spend $33.
However, if Trim fails to save money, you owe them nothing! There is no downside to giving them a go and seeing what you can potentially save.
Trim may also help you maintain your budget, identify and cancel unneeded services (like Netflix or a gym membership), and cut your monthly expenditures. You can read our complete Trim review here, or you can start using Trim right away.
Gabi is another excellent personal finance tool that may help you save money on your vehicle insurance. To understand more about Gabi, read our entire review here.
3. Assign Value to Purchases
Another way to save money is to give a value to each purchase.
I am not talking about the cost of something, but rather how much you value it.
The concept is not simple and may require some time to apply, but in practice, anything you value more than the price might be regarded a good buy.
For example, if you desire a new bike and value it at $500, but it only costs $250, it is a smart buy. If the bike cost $1,000, you would probably avoid it.
Another, simpler approach to get started with this concept is to determine your hourly wages. If you make $10 per hour, and use the same bike example, you must consider if the $250 bike is worth 25 hours of work.
It is sometimes simpler to ascribe value based on hours worked rather than actual cash.
The disadvantage of this approach is that you cannot still purchase all you value. The principle basically allows you to make smarter purchases and acquire the items you value the most.
4. Rethink Sales.
When it comes to buying on sale, you must win the mental fight of properly framing the bargain.
Retailers want you to focus on “how much you saved.”
However, you must remain focused on “how much you spent.”
Focusing on the cost rather than the savings ensures that you approach sales correctly.
For example, anything that was formerly $100 and is now $50 appears to be a great deal. It’s 50% off!
The trick is to continue using tip #3 from above and ask yourself, regardless of the initial price, is this item worth $50?
If so, you should consider making the purchase. If the response is no, you should pass, regardless of how large the transaction is. Just note that if you make the transaction, you will have spent $50, not saved $50!
The same is true for purchase now and pay later applications, which may break down a hefty upfront cost into smaller installments.
Save the Right Way: Rakuten can help you save money on purchases you would have made regardless.
5. Try a No Spending Challenge.
The ultimate approach to stop spending money is to participate in a no-spend challenge.
A no-spend challenge can take many forms, but the overall goal is to spend money solely on necessities for a set amount of time.
For instance, you may conduct a no-spend challenge for:
One day.
In one week
One month.
For three months
a whole year! (This could be a little severe.)
During that time, you would be allowed to spend money on necessities such as rent or mortgage, utilities, petrol for your car, loan repayments, and food.
However, you would have to eliminate all non-essential expenditure, such as eating out, purchasing coffee, new clothing, movies, shopping, and other discretionary spending.
While a no-spend month is not a long-term practice or smart idea, it is an effective technique for many people to press the “reset button” and regain control of their spending patterns. Perhaps you’ll break some bad habits along the road.
Plus, you’ll save money right away by not spending money on needless items for a short period of time!
6. Pay Yourself First
Embracing a pay yourself first approach entails rotating the three budgeting buckets we discussed previously.
A classic budget divides your revenue into three categories: income, spending, and savings.
With a pay yourself first approach, you earn income, save money, and spend the remainder on expenses.
Pay yourself first.
This mentality adjustment ensures that you prioritize saving and investing for your future, and that your spending align with those goals.
Start Investing now: Begin investing now with Betterment, a premier robo-advisor, and let them do the heavy lifting.
7. Wait thirty days.
Another tip to ensure you only spend money on items you value is to wait 30 days before acquiring any non-essential goods.
Returning to the bike example, instead of spending $250 right away, you would wait 30 days.
If you still desire the bike after 30 days, it’s a strong sign that you’ll cherish it long-term and that it’s a worthwhile investment.
If you decide you don’t want the bike after 30 days, you’ve just saved $250!
8. Avoid Bad Debt.
An apparent but valuable recommendation is to avoid bad debt and only spend money on items you can afford.
To clarify, “bad” debt includes credit card debt and high-interest personal loans. It excludes mortgages, most student debts, and auto payments.
To prevent bad debt, you’ll have to spend just what you can afford. Just because your credit card has a $1,000 credit limit doesn’t mean you should spend it all.
Some may advise against using credit cards and instead opt for cash. I don’t because I enjoy the benefits that credit cards provide, but they must be used wisely and paid off in full each month to reap the full benefits.
9. Concentrate on “the Big Three” expenses.
If you’re having trouble spending less money on little costs, you may need to focus on the main three expenses, which include:
Housing Transportation Food
Lowering any three of these expenditures takes a lot of effort, but if you succeed, you will save the most money.
When it comes to minimizing your housing costs, you might consider downsizing or geoarbitrage.
Avoiding having a car is the most cost-effective option for mobility. Using public transit, bicycling, or walking saves you not just money on vehicle payments, but also on auto insurance, maintenance, and parking.
Do Not Forget! Gabi can help you determine how much you may save on your vehicle insurance payment.
For many people, food and beverages are the third most expensive item. Of course, the simplest approach to cut back on spending here is to go to the grocery store more frequently and eat out less. You may even go one step further by making a meal plan and shopping list to ensure that you stay within your food budget.
10. Challenge yourself to accomplish more.
Finally, if you truly need to quit spending, you should push yourself to accomplish more. Whether it’s cooking, cleaning, yard work, mowing the grass, putting things up, painting, or anything else, doing it yourself instead of outsourcing can save you a lot of money.
I appreciate that not everyone is a handyman, and that some of these ordinary jobs may be out of reach for you, but you could be surprised by what you are capable of doing to stop spending and save money.
What to do with your extra money
When you stop spending money, you give yourself alternatives for what to do with the additional money you have in your pocket.
Here are three suggestions on where to deposit your windfall money.
Payoff Bad Debt
First and foremost, pay off any bad debt you may have.
We discussed this before, and bad debt would include credit card debt, personal loan debt, and any debt with an interest rate more than 5-7%.
The distinction between good and bad debt is typically set at 5-7% since it is the expected future return on investment.
If you had $100 on hand, it would be better spent paying down debt at a 15% interest rate because it is more than the average return from the market. On the other hand, if you have a 3% mortgage, you’re better off making your usual monthly payments and investing the excess money (rather than paying down the mortgage quicker) in the hopes of earning a higher return than 3% on average.
Create an Emergency Fund.
After you’ve paid off your bad debt, you should work on accumulating an emergency fund.
An emergency fund is often made up of 3-6 months’ worth of expenditures saved in a high-yield savings account. The purpose of this fund is to cover unforeseen costs such as a sudden medical bill or vehicle payment, as well as to keep you covered for a brief period of time if you lose your work.
Invest in Index Funds
Investing in index funds is an excellent approach for new investors (and seasoned investors) to begin saving for retirement and achieve their long-term financial objectives.
Summary: Stop Spending Money.
There are several tactics, ideas, and tricks you may use to reduce your spending, but the first and most crucial step is to understand your budget.
It’s difficult to control a problematic spending habit when you don’t know how bad it is or where the money is going.
From there, you’ll be able to put some of these suggestions into action to help you stop spending and save money!
