Are you an overspender? Here are 5 tips for managing your money

Overspending has proven to be one of the major reasons many Canadians end up in financial crises. With many opting to use their credit cards for purchases instead of cash and others spending without a budget, the possibilities of piling up debts continue to rise.

Your spending habits are a crucial part of your journey to a fresh financial start and a healthy financial life. Your ability to manage your expenses, curtail unnecessary spending and pay off your credit card balances is a huge determinant for a debt-free life.

But what if you’re already in debt or inching closer to it with every swipe of your card?

Here are some spending management tips to prevent you from insolvency and get you back on track financially.

Set financial goals

In many cases, this is an obligatory first step towards creating new spending habits. Paint a picture of your financial future, assess your current financial reality, and compare both. The results of your analysis will form the basis for your short- and long-term goals.

When setting your goal, make sure it’s SMART – Specific, Measurable, Achievable, Realistic and Time-bound. If you’re in debt, a SMART goal can be to pay off 70 percent of your debt in six months or one year, depending on the resources available to you. Once you’ve set your goals and identified how to meet down, it is important to write them down and constantly revisit them to track your progress. When you’ve met a goal, you can pat yourself on the back with a gift and move to the next one.

Create a periodic budget

A budget is a plan that helps you manage money, and it’s usually difficult to go wrong with a plan. Depending on the peculiarities of your income and expenses, you can set a weekly, bi-weekly, or monthly budget. Just make sure it is realistic enough to stick to and flexible enough to alter when your circumstances change.

Your budget will help you to achieve your financial goals and provide you a holistic view of how your money moves. Knowing where your money goes is an important step towards cutting off habits or behaviours that lead to indiscriminate spending. For example, if you typically spend a certain amount of your income on clothing every month, having a budget would help you review this expense against the content of your wardrobe. Then you can decide if you need to cut back on the amount earmarked for clothes or eliminate it altogether.

Save! Save!! Save!!!

The importance of putting a fraction of your income aside cannot be overemphasized. Create an emergency fund and earmark a percentage of your salary that will go into this fund. Whether it’s a small or significant amount, it will save you in the event of an unexpected need such as a health bill, car repair bill, etc.

If you never need to use your savings for an emergency, you can benefit from the compound interest you have earned on it over the course of time you saved. However, this is only possible if you save in an investment account that promises periodic returns.

There are no downsides to saving. Not only does you to build a positive financial habit, but it also shores up your financial security.

Review your paid subscriptions

These may seem unimportant in the grand scheme of things; however, you will save an unexpected amount of money if you take time to closely review your recurring charges for those that have become redundant or unnecessary. Cancel subscriptions to services you no longer have need for.

Reduce credit card debt

We already identified credit card debt as a major cause of insolvency, so you should actively ensure that you pay off your credit card balance every month and use cash for purchases such as groceries, clothing, and other living necessities. If you’re in an extreme debt situation, it’s best to speak to a professional such as Licensed Insolvency Trustee on a fitting approach such as filing a consumer proposal or bankruptcy.

Seek professional help

There’s only so much help you can get from a professional when you find yourself in financial trouble. You must first commit to being financially responsible and one way to start is by having a firm grasp on your spending habits. It’s never too late to start.

If, however, you’ve found yourself overwhelmed by debt due to overspending, we can help you find the right solution. Contact us for a free, no obligation, confidential consultation to find a Life-Changing Debt Solution that fits your unique situation.