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How to Stop Overspending

Admitting you have an issue is the first step in taking control of your money. Of course, that’s easier said than done, but there are some concrete measures you can take to help keep your spending in check and improve your financial habits.

Create a Budget (or Improve Your Existing Budget)

Taking a hard look at what you bring in versus what you spend is a crucial first step. Seeing how much you’re blowing on clothes, electronics, and other luxury items can be a major wake-up call.

Here’s a simple process to get you started:

  1. Start a Spreadsheet. Whether you do it online, with Excel, or just on an old-fashioned piece of paper, create a spreadsheet to categorize different expenses and types of income.
  2. Add Up Pay Stubs. Calculate how much you’re bringing in each month from salary, wages, tips, and any other sources of income.
  3. Gather All Your Bills. Get your utility, credit card, mortgage bills, and whatever else you have to pay each month. Start by making a category for fixed expenses and tallying them up first.
  4. List Your Variable Spending. From entertainment to clothing, and from groceries to fuel, start allocating funds to each variable spending category. Base your numbers on how much you’ve spent in the past, but also try to reign things in a bit. Don’t start out too strict though. I find that if my budget is too tight, I’m just setting myself up for later splurges and eventual failure.
  5. Put Some Money in Savings. Don’t forget that a good budget also allocates money to savings. Try following the “50/30/20″ rule: 50% of your monthly income should go to fixed and necessary expenses, 30% to fun stuff and lifestyle choices, and 20% to savings and paying off debts. Talk to a financial planner about what type of savings vehicle is best for your financial goals – a regular savings account for emergency expenses and superannuation for your retirement  should help you get started.
  6. Test Your Budget. Leave space beside each budget entry and enter the actual amounts you spend going forward. Compare them to what you’d planned and adjust your numbers for the next month accordingly.

Suppose you go on too strict a diet – you’re going to be very tempted to splurge when the right temptation catches your eye. The same holds true for spending. Yes, suddenly putting yourself on a strict budget can help you save money – until you go nuts and end up on a shopping binge.

It’s okay to give yourself little rewards now and again to stay on track. If you love clothes, put a little cash aside or load up a prepaid debit card for a reasonable shopping trip. If you tend to splurge on fine dining, plan one night each month to nosh at your favourite restaurant. Love to travel? Reward your good behaviour by surfing around for last-minute deals or taking a day to explore what your city has to offer. This is your financial version of a cheat meal, so take advantage of it.

If you feel that you need help with your budget, please email or phone 0422 237 588

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