Spending too much money can be a problem that can impact so many aspects of your future and your finances. When you’re a constant over spender you’ll find it hard to grow a savings account or save for retirement because there just isn’t enough money to go around.
However, some people who think they have a spending problem actually have the opposite problem, an income problem. In this article we are going to talk about the difference between the two and the signs of both so you can properly diagnose your situation.
What is an Income Problem?
An income problem is just that, a problem with your income. If you’re experiencing an income problem you aren’t making nearly enough money to cover your basic needs.
This means that you’ve managed to cut all unnecessary expenses from your budget but you’re still struggling to make ends meet.
There are a ton of different things that could drive you to have an income problem. You could be in a field that doesn’t make you enough money, or you could be in serious debt and struggling to make your minimum payments.
This could include student loan debt, or medical debt, or maybe a mortgage payment. If you have a ton of consumer debt on credit cards, that’s more of a spending problem issue.
If you’re unable to pay off your debt, feed your family, and pay your bills, chances are you have an income problem.
How to Fix an Income Problem
There are a ton of small things you can do to try and fix your income problem, the first is to make more money. You could go and get a part-time job to try and pay off your debt or grow your savings so that you can be in a better financial position.
If you have a family or are unable to go and get a part-time job, you could even find a side hustle or way to make money from home that can grow your income.
You can also go and try and get more money from your regular job. You could ask for a raise or a promotion, which may have success! Or you can transfer to a position that has better opportunity for upward movement to earn more income.
You can also change your living situation. You could get a smaller place or get a roommate to help you cut living costs so your income can stretch a bit further.
What is a Spending Problem?
When you have a spending problem, you are living way above your means and because of it, you have a whole lot of month at the end of your money.
You’re focusing on things that you want rather than the things that are actually important to you for your future. You’ll buy a new outfit instead of investing your money and you’ll probably only wear that outfit once or twice.
For a lot of people with a spending problem, most of their extra spending happens on credit cards which only leads to more issues. You’ll end up with tons of money in interest payments and it can take you years to be able to pay it off.
How to Fix a Spending Problem
1. Track Your Expenses
The very first thing you should do if you think you have a spending problem is to start tracking your expenses for a few months. This is valuable because it will show you where you put your money each month and can really be helpful in showing you where you can cut.
You should track your expenses for at least a month, but preferably longer so you can really get a picture for what you’re doing.
2. Build an Emergency Fund
If you’re extremely self aware and you understand that you like to spend more money than you should, those habits are going to die hard. You should try and build up an emergency fund that will cover you in dire circumstances.
There is a strong chance that you’ll overspend on more than one occasion and then experience some kind of unexpected financial situation (i.e., job loss, or medical issues) and having that emergency fund built up can help take care of a lot of that burden.
3. Downsize Your Car Expenses
If you have an expensive car, that usually comes with an expensive car payment. People who have a spending problem are more likely to convince themselves that buying a brand new car is wise and taking on that debt.
If you’re spending too much money each month on transportation, you should consider reading our article about how to save money on car expenses so that you can change that part of your budget each month.
4. Start Budgeting
Having a budget is great if you have a spending problem because you can see exactly where you’re allowed to spend money. If it isn’t in the budget, you’re no longer allowed to do it.
This can stop you from making a ton of impulse purchases and help you save a ton!
If you’re looking to start budgeting seriously, you should grab a copy of our $5 Printable Budgeting Binder. This is a great way to budget if you don’t want to to use expensive budgeting software and love using good ol’ pen and paper!
5. Pay Off Your Credit Cards
Most people who have a spending problem are probably doing a lot of that spending on credit cards or using cash and putting their necessities on credit as a way to justify it.
If this sounds like you, you should probably pay off your credit cards and maybe even stop using them entirely. This can be a slippery slope that can cause you to get into really deep credit card debt, so it’s best to put a stop to it as soon as possible.
6. Pay Attention To Your Credit Score
One of the most important aspects of personal finance (that no one really understands) is your credit score. This 3 digit number is going to influence your interest rates on cars, mortgages, and so much more as well as your ability to rent apartments and more.
When you have a spending problem, you’re usually focused on getting things and not on your overall financial health but this needs to change. You should be paying attention and tracking your credit score as much as you can if you want to be financially successful.
If you want to really focus on your credit score FOR FREE you should try out Credit Sesame. They are a free service that lets you monitor your score and will alert you if anything changes to avoid identity theft! Sign Up for Credit Sesame Free!
7. Cut Back on Unnecessary Spending
A big part of quitting being a spender is thinking about all of the totally unnecessary spending you do each and every day.
This could be buying an expensive coffee each morning when you have a coffee maker at home, or buying lunch at work each day when you have leftovers going bad in the fridge.
Most of your convenience spending is entirely pointless and can be easily cut out to help you save money when you’re a super spender.
Finding out if you have an income problem or a spending problem is an easy task, but can really make you wonder how you’re doing with your money.
Hopefully these tips for getting out of a spending problem are helpful and will get you to a better financial spot!
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