Stop overspending with these simple money hacks

This doesn’t mean treats and splurges are off the menu completely, but it does call for a better understanding of how much exactly we’re frittering away each month, why we feel compelled to do it, and whether these purchases are really worth it. With more and more people getting into debt (credit card debt averaged £2,229 per household and £1,171 per adult in June 2022, according to The Money Charity spending more than you earn could torpedo your bank balance and take years to repay. We take a look at why these unhealthy money habits may exist, and offer tips to kick cash wasting into touch.

How do I know if I’m spending too much money?

What’s making me overspend?

How can I stop overspending?

• Swap plastic for cash
• Give peer pressure the push
• Sleep on it
• Substitute to make savings
• Get a better deal on debt

What can I do to control my spending long-term?

How do I know if I'm spending too much money?

The first sign you may be spending too much is if you’re buying stuff without a clear plan, or you can’t say where all your money’s gone at the end of the month. If you don’t have a budget, and so don’t know exactly know how much money is coming in and going out of your account, it’s all too easy to get carried away in shops or on nights out. Unless you consciously track your spending you’ll never know if the money is there in the first place.

Another sign you might be living beyond your means is how often you find yourself reaching for the credit card. Whether you’re using it to pay for a magazine, or a coffee after work with friends, or getting a cash advance on credit cards (ie. withdrawing money from an ATM), remember that each time you do so you’re effectively taking out a loan and potentially racking up interest and fees if you fail to pay it off at the end of the month. Using credit cards like this should be a telltale sign you don’t have the money to pay for these splurges, which would ordinarily be covered by a debit card/funds in your bank account. Learning how to use credit cards responsibly and being disciplined in your spending should help you steer away from this habit.

Finally, ask yourself whether you’d have any money to fall back on in the event of an emergency. Without savings to cover an unforeseen bill or to make up your salary short-term if you lose your job, you should probably be reining in what you splurge in the sandwich shop or on new shoes. Ditto if you’ve not set aside money for retirement. While you might not be going into the red by forking out on treats and cinema trips, you’re effectively cheating yourself out of a comfortable lifestyle later in life.

What’s making me overspend?

There are countless reasons why you might struggle to control your spending, including the financial habits passed down by your parents or simply a ‘keeping up with the Joneses’ mentality. Both are particularly hard to shake – the first effectively sets a blueprint for how you manage your money (or don’t!), and the second is almost inescapable in an increasingly consumerist world driven by clever marketing and FOMO-inducing social media posts.

Unless you have a budget, you might not even realise you’re overspending. Or perhaps you do have a spreadsheet in place, but find yourself taking one step forwards and two steps back by being brilliantly controlled one week but going wildly over budget the next as some kind of ‘reward’ for all the efforts.

Other people may well appreciate their money habits may not be sensible, but justify the splurges with a ‘seize the day’ philosophy that gives little or no financial thought to tomorrow. Favouring instant gratification over future benefits (or future financial muddles) is all too common. It’s hard to motivate yourself to save for old age when you’re fresh out of university with your first pay cheque burning a hole in your pocket, for example. However, delaying the odd pleasure to put pennies in a savings account is well worth any short-term pain.

There are emotional reasons, too, why you might be spending more than you can afford. Compulsively splashing out on designer clothes or flashy cars could be an unconscious effort to fill a hole in your life, or to find some measure of happiness. Or perhaps you like treating your friends and family extravagantly at Christmas because you were never spoilt in this way when you were growing up, or because you feel it might make you more popular. Sometimes, our financial habits defy logical explanations, but this doesn’t mean they can’t be fixed.

How can I stop overspending?

1) Swap plastic for cash

The cost of living crisis has seen a resurgence of traditional cash over plastic cards at the till as people literally count their pennies. It’s all about encouraging more conscious spending and putting a cap on what we buy (the idea is it forces you to spend no more than what you have on you).

• If carrying around a wallet of cash makes you feel nervous or seems plain inconvenient, prepaid cards offer much the same benefits. You can only spend what you’ve loaded onto the card be-forehand (there’s no credit or overdraft available), making it a great way to stick to a budget. There are plenty of UK prepaid cards to choose from, including some offering cashback. Others are aimed specifically at teenagers and children if they’re also guilty of overspending or you simply want to teach them good money habits from an early age.
• Take your loose change out of your purse when you get home and stick it in a savings jar. Psychologically, we’re more likely to spend pound coins etc than breaking a note, so not only will it help curb spending when you’re out and about, but the money you accumulate in the jar could be put towards paying off debt or diverted to a savings account at the end of the month.

2) Give peer pressure the push

You don’t have to hit the pub every Friday night. You don’t have to go on a monthly shopping spree with your best mate. If you find it difficult to curb your spending when you’re out and about with friends or work colleagues, it might be time to take yourself away from temptation – or at least start being upfront about what you can afford. Being financially honest with others is not only empowering (try it), it’s also more likely to keep your hard-earned cash in your pocket. It doesn’t have to mean being anti-social either – you’ll just need to be a little more creative when it comes to organising get-togethers.

• Host a clothes swap party instead of hitting the high street. Not only is it great for your purse, you’ll also be doing your bit for the planet by giving garments a longer life.
• Organise nights in instead of defaulting to the pub. Bringing a bottle is bound to be cheaper than pints at a bar, and keeping it local will save on the taxi ride home from town.
• Don’t feel compelled to gift your friends pricey chocolates or a flamboyant bouquet just because they spoilt you with high-end toiletries last birthday. If they’ve young children, give up your time instead by offering a ‘babysitting voucher' so they can have a night out, or put your craft skills to good use with a DIY offering.
• There are plenty of sociable activities that don’t require splashing out. If your best pal is sporty, suggest meeting up for Parkrun instead. If they’re more into retail therapy, persuade them of the merits of volunteering in the local charity shop. Working behind the till, sorting collections and organising displays will offer a new slant on the shopping experience, provide time to hang out together, and give something back to the community.
• It’s not always friends who unwittingly pressure us to overspend – family can be just as much to blame. If you struggle to resist your kids’ plaintive cries for a pack of crisps or chocolate bar in the supermarket, try doing the grocery shop when they’re at school instead. You can check out our dedicated blog post for other ways to save on your food bill.

3) Sleep on it

It’s okay to want a bigger TV or a brand new T-shirt, but you don’t need to whip out your purse the moment you set eyes on it. Practising ‘delayed gratification’ can still get you the goods without going overdrawn – and gives you a little extra time to consider whether you really need it in the first place.

• Have you ever put an item in your online basket, been distracted by the kids or what to cook for dinner, and then come back to it a few days later and been surprised by how much you thought you wanted the stuff – and how little you care now? Taking 24 hours before pressing ‘confirm order’ is a good way to make sure you’re as desperate for the item as you think, and reflect on whether you’ll use it/if it’s worth the money. It also gives you time to do the sums to make sure you can afford it.
• If you still want the item but realise it’ll be a financial stretch, you don’t have to give up on it altogether. Sort out a savings plan and put a little aside each week. Before you know it you’ll have worked up enough to buy it guilt-free.
• Sometimes we simply can’t curb our enthusiasm. If you’ve splurged when you shouldn’t, don’t beat yourself up too much and definitely don’t tear up the budget. Simply re-work it for the rest of that week/month to take into account the unforeseen outgoings and adjust future spending accordingly.

4) Substitute to make savings

Sometimes similar products do the same job – but with a markedly different impact on the house-hold budget. We’re not just talking about buying supermarket own brands to save a few pence here and there, but also products that benefit you long-term because of their energy ratings or enhanced efficiency.

• Homes are the best place to start. Swapping halogen light bulbs (including spots) for LEDs, for example, will ensure lights not only last longer but also use less energy. Or turn down your thermostat by just one degree to save a packet on your heating. We’ve tons more tips like this in our post on ways to save on your electricity bill.
• Ditch the car for shorter journeys and try walking or cycling the route instead. You’ll save money on petrol, help cut pollution as well as getting exercise. For essential journeys, for example into work, suggest a car share scheme to colleagues where you all take turns to taxi the others.
• If you’re struggling to decide between two similar items – say, a winter coat for £150 and one for £100 – it can be helpful to visualise the cash you’d save on the lower-priced one. Consider what else the extra £50 could buy you, or the dent it could make paying off a credit card at the end of the month, or the boost it would provide to your savings pot.

5) Get a better deal on debt

If you’re struggling to pay off loans, consider that you might be inadvertently overspending on them too. First things first: avoid borrowing any more – you risk a debt spiral that will only dig you even deeper into financial stress. Second: find ways to reduce the interest you're paying on existing loans so your repayments go further towards paying back the amount you borrowed in the first place and you can clear it faster.

• A 0% balance transfer card will shift debt onto a new card – but with a 0% interest period. Compare credit cards carefully to see which ones will accept you (being turned down can harm your credit score) and opt for the one offering the lowest fee in the time you anticipate being able to repay. Make sure you don’t miss the minimum monthly repayments and try to clear the card before the 0% period ends or you’ll be hit with higher APR after.
• Prioritise your other debts so you’re clearing the highest-interest ones first. Use any spare cash (and savings too, if the interest cost of the debt is higher than you earn saving it) to get back to zero, paying minimum repayments on the other loans in the meantime. Once that’s gone, do the same again on the next costliest, and so on.
• Avoid high-interest short term debt. If you have to apply for a short term loan, borrow as little as possible and budget to clear the debt as soon as you can. Short term loans, such as payday loans, are a costly way to borrow money, so be sure to compare payday loans thoroughly before committing to one and be aware of the short term loan risks. If you are struggling financially, these types of loans can be hard to pay back, and are best avoided. And finally, don’t take out a payday loan to repay another loan. Rather, look at payday loan alternatives instead.

What can I do to control my spending long-term?

The only real way to keep track of your spending long-term is to be crystal clear what you can afford. Remember, it’s okay to spend money – it only becomes harmful when you blow more than you actually have. To that end, we can’t stress enough the importance of budgeting. Knowing what’s coming in and what’s going out is the core of everything to do with financial fitness, and – here’s the surprising thing – this info doesn’t have to be confined to a joyless spreadsheet. We’ve an entire blog post on how to make budgeting fun, including getting partners, family and friends on board. Plus, with Open Banking technology improving financial services, you will find there are many apps that help manage your money by automatically categorising your spending and offering other clever budgeting tools.

Regardless of what you decide to use, sticking to your budget might not always be easy, but it’s the first step to taking control of your spending rather than have your money (or lack of) control you. Done right, and over the course of a year or more, you’ll not only be able to plan your purchasing better but could see savings dreams start to come true as well.