How to Stop Overspending - Hit Pause
"Every action you take is a vote for the type of person you wish to become."
-James Clear
I'm in my room looking at my bookshelf, counting all the books I have not read. I wonder to myself how I got so many of these. Why don't I read them? Why do I keep buying them? It seems like both a waste of money and a waste of space.
A day later, I see someone reading a book on the bus as I ride into work. I walk into the office, say hi to everyone, log into my computer, and go look at the book online. I buy it.
I have always been curious about many different topics. That's my stimulus. I come across a book about astrophysics, the brain, or death, and I imagine myself wanting to be the kind of person who knows that stuff. Because of that, I buy them immediately. That's my response.
I have no space in between the stimulus (my impulse) and my response (my purchase).
Fast forward 13 years to today, and I now keep different lists for books that I THINK I want to buy. There are easily 25 books on these lists right now. I'm glad I haven't bought them yet, because I don't have the time to read 25 extra books. Some of them stay and I eventually buy and read them, but many of them get deleted when I realize I'm never going to read it.
Introducing space in between these stimuli and my response has helped me stop overspending on books.
Increasing the space between stimulus and response helps with more than just books, it helps us make purchases with more intention, and curb our overspending.
Money Is Stressful
Money is among the most stressful things in our lives. More than 60% of Americans say that money is the top stressor in their lives. Further, it's one of the top contributors to marital strain. It's hard to think about, it's hard to talk about, and it's hard to handle.
Just because 38% of people say that money is not their TOP stressor doesn't mean that it's not stressful. With some exceptions, money is stressful for all of us.
It's no wonder money is so stressful for most of us. A large percentage of us are living paycheck-to-paycheck - meaning, a third of us have little or no room in our financial management to weather a missed paycheck.
You might be living paycheck-to-paycheck yourself. If you're not, you might be tempted to think this is only a phenomenon for people at or near poverty. But, the people living below the poverty level make up only a fraction of those living paycheck-to-paycheck.
That means that, even if every single household in poverty is paycheck-to-paycheck (which isn't necessarily the case), there are still many folks living paycheck-to-paycheck who aren't in poverty.
Undersaving
If you live paycheck-to-paycheck, you can't save. But not saving doesn't mean you are paycheck-to-paycheck. For many people who don't have to wait until their next paycheck to pay bills, they still struggle to save. I know of a person I'll "Pat" who makes $4 million per year but spends $3.5 million per year. You might be thinking that $500,000 is a good amount to save each year, but remember two things; 1) taxes eat away most of that, and 2) Pat will never be able to retire and keep the same $3.5 million per year lifestyle by saving 15% of the annual spending (meaning, it takes seven years of savings to save up enough to spend purchase one year's worth of expenses).
Not saving is a big problem, but it's predictable. Emotions today are real. Marketers know how to separate us from our money. They make it easy to spend. Emotions in the future don't exist (yet). The future doesn't feel the same to us. We rob our future selves to pay off our present selves.
When things happen to us we have a reflex. In the physical world, reflexes happen because we catch in our peripheral vision. In the non-physical world of money, it could be a strong impulse to spend money (by, for example, buying a book after seeing someone else reading it). After our initial reflex, we feel some emotion. Only then do we start to have thoughts and form opinions.
If we make financial decisions too quickly we haven't started thinking yet. We let our emotions and impulses get the best of us. Undersaving is, in many cases, caused by overspending, because we haven't thought through our financial decisions properly.
Overspending
Two major reasons people undersave are 1) not making enough money, that is, living paycheck-to-paycheck, and 2) overspending. Spending is a unique activity because people engage in it for so many different reasons. People shop because they need things. They shop because they're bored. They shop because it's a fun activity people do together ("Do you want to go shopping!?). Or, people shop to reduce stress.
Stress, anxiety, and feelings of being judged tend to increase impulsiveness. Thus, no matter why we shop, some of us will enter a vicious cycle. The cycle starts with believing that money buys happiness or stress relief. That leads us to be broke because we spent too much. Then we feel stress because of our money troubles. Then we think that if we had more money we'd be happier and the cycle continues.
One of the major problems here is that, for the most part, money does not buy happiness. And, shopping can leave us feeling bad about what we've done. If we don't feel negative emotions right away, we feel them when we tell our spouse how much we spent. We feel them when the credit card bill comes. And we feel them when we have to look at all the stuff we've purchased.
Mindless Spending
Shopping happens mindlessly for most of us. Whether we're stress shopping, or shopping with friends, or just buying things we think we need without thought, it happens without our awareness.
Imagine sitting down and watching some television with a bag of chips in front of you. If you're anything like me, those chips will be gone in no time and you have no idea where they went, or why they went so quickly. It's a lot like that with our money. Without awareness, it can disappear fast. Money tends to separate itself from us if we don't pay attention.
Reintroducing Awareness
Reintroducing awareness involves forcing ourselves to see what's happening. If we act too quickly, we don't notice anything happened until later when the credit card bill comes or when we notice our cash is gone. Making yourself aware of your spending doesn't need to (and in fact, shouldn't) involve judgment, shame, or blame. All you want to do is make sure you see what's happening.
Think about our disappearing bag of chips. Because of distractions like online streaming services, we don't know our chips are gone until there are none left. What if we took some time upfront and separated those chips into three separate bags. Remember, we're not introducing shame or judgment, just awareness. That awareness hits us when we finish that first smaller bag. We forced ourselves to decide if the second bag is worth it. Maybe it is, maybe it isn't. If it is worth it, we have to decide again after the second bag. We make sure we understand what's happening. We always give ourselves permission to keep going, but just the awareness that we've already consumed a third of a bag of chips or two-thirds of a bag of chips makes us think about whether or not we want to keep going. We make the decision with intention.
Awareness-Introduction Ideas
Here are some ideas you can use that introduce similar awareness to separating your chips into separate bags. Remember, these are not judgment-inducing exercises. You still have permission to buy what you were going to buy, just like you have permission to keep eating your chips. Instead, these are meant to give you some awareness.
"Isn't That Interesting": This challenge is meant to bring awareness to how much you spend. It's becoming easier and easier to spend our money and most of us haven't got a clue how much the stuff we buy costs. Back when we used cash we had to count out actual money. When we wrote checks we had to write the amount twice. Now we tap our cards, or even our phones to a reader while we're having a conversation with someone.
After you make a purchase, the challenge is to make sure you get your receipt. Then write down how much you spend and on what. Then simply say to yourself, "isn't that interesting." For example, If I bought a piece of artwork for my office, I would write "$90 on artwork." Then I said to myself, "Derek, you just spent $90 on artwork. Isn't that interesting."
Again, the whole point is to bring awareness back to your spending, not to judge, shame, or blame. A bonus is to write down how you feel now that you've bought it - not why you have those feelings, not what those feelings mean, and not what you "should" have done - simply write down what you feel.
Values: This challenge takes a little bit of time on the front end. If you spend some time thinking about what's important to you and commit to using your money as a tool to live your life on purpose according to your values, then it becomes relatively easy to view your purchases through that lens. Write your values down on a notecard and keep it with you. Then, before (this one happens before the purchase, which is different than the first challenge) you make a purchase, read your card to yourself and justify your purchase by fitting into your values. As with all of these, you're not depriving yourself. But just like finishing a minibag of chips gets you to think about whether you want to keep going, checking your values gets you to think about whether or not you want to make the purchase.
Buy It Tomorrow: This challenge gets you to commit to waiting a day before making any purchase. If you shop online, throw the items in the cart or in a list and wait to see how you feel about it tomorrow. If you're at a store, think about purchasing the item, and if you're sure you want it, make a note to come back tomorrow to buy it.
Awareness and mindfulness are your keys to better financial health. Hit the pause button and break out of your trance.
You only have one life. Live intentionally.
Do you want to print this or view it offline? Download the PDF version.
Related Money Health® ReadingReferences and Influences:American Psychological Association: Most Common Sources of Stress
Dan Ariely, Jeff Kreisler: Dollars and Sense
Consumer Financial Protection Bureau: Consumer insights on managing spending
Brad Klontz, Ted Klontz: Mind Over Money
Sarah Newcomb: Loaded
Jordan Peterson: 12 Rules for Life
Poverty USA: Poverty Facts
Carl Richards: The One-Page Financial Plan
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