By: Alma Rojas, NYLAG Senior Financial Counselor
Recent research from Nerdwallet in 2023, reveals that a staggering, 84% of Americans have gone over budget at some point. This is called overspending, and this can happen for various reasons. Sometimes, overspending is a result of external factors that we may not have much control over, such as national economic conditions or a loss of income. For instance, the increasing rise in healthcare and childcare expenses, which tend to impact low and moderate-income communities of color the most, add to the financial strain many individuals face.
Other times, we might find ourselves overspending due to societal pressure to spend money- for example from friends, family, or social media. We may also struggle with compulsive or impulsive spending that stem from a variety of reasons. For folks in these two categories of overspending, practicing intentional spending may help alleviate some financial stress.
Intentional spending means making purchases that truly align with your needs, values, and financial goals. When you practice intentional spending, you prioritize purchases that matter to you and spend less on items that produce buyer’s remorse and/or that make you go over budget.
Below are some tips to get you started:
Step 1: Self Reflection and Vision Setting
Reflect on the lifestyle you currently lead and what type of lifestyle you want to live, and whether the latter is sustainable with your current financial situation. It’s important to be honest (and kind) to yourself during this process. To help this process you can:
- Write down some financial values and financial goals (short, mid, and long-term). If you are a visual person, you can create a vision board.
- Review your monthly spending by checking your bank and credit card statements.
- As you organize the spending into various categories (such as housing, transportation, entertainment, etc.) jot down some notes, such as:
What expenses are Needs (must haves, such as housing), what expenses are important Quality of Life Expenses (important to your well-being), and what expenses were Transitory Wants (items that you bought on impulse)
Pro tip: The goal during this process is to find out whether your current discretionary expenses match your values and goals. To learn more visit this website.
- As you organize the spending into various categories (such as housing, transportation, entertainment, etc.) jot down some notes, such as:
Step 2: Identify and Adjust
Identify which specific category of spending you tend to go over budget. If your goal is to reduce spending, reframe the reduction not as a punishment, but as something that you are doing to help you achieve your financial goals and improve your long-term quality of life. You can start by:
- Tracking your spending in this category for 2-4 weeks and jotting down any patterns or trends. This process can help you find out what’s going on around the time of these purchases, and whether it is something that a) you are willing to reduce and b) something you can realistically reduce.
- In the 3rd or 4th week, create a target budget for this category (how much max do you want to spend). Continue tracking spending to see if the budget is sustainable and if you need support or other tools to maintain it.
Pro tip: Sometimes we might overspend because we have various stressors in our lives, in these cases, seeking the help of a mental health professional can help.
Step 3: Implement spending strategies to reduce impulse spending.
- Deactivate one-click payment methods, and remove your credit card and debit card payment information from online shopping websites and digital wallets.
Having to input payment information or searching for your wallet every time you want to buy something creates a natural pause to reflect whether the item is a momentary want or need. - Create a wish list.
When you feel the urge to buy something, write down the date, the item, how much it costs, and why you want to buy it. Revisit this item in 3-7 days and see if you still want to purchase this item. - Use the envelope system (digital or physical)
Allocate a certain amount of income to a category of expenses you tend to overspend on. Limit your spending in this category to what is in this envelope. - Set-up auto saving to a high-yield savings account, perhaps even at a different bank than your primary account.
This ensures that you pay yourself first to meet your various financial goals. So, any discretionary funds remaining after your needs have been met can then be spent guilt-free.
Remember that while there will always be situations beyond our control, understanding the root causes of your overspending and practicing intentional spending can help you align your financial choices with your values and long-term goals. Every small step you take toward financial discipline is a significant leap toward financial freedom. It’s time to reclaim your budget, reduce financial stress, and build a future where your money supports the life you truly desire.
Still have questions?
NYLAG Financial Counselors help you create a plan to secure a financially stable future.
- If you are currently working with a NYLAG financial counselor, reach out to them now to discuss your tax planning options.
