Avoid Overspending: How to Cut Back Without Cutting Out

Whether one is living on a shoestring budget or has the flexibility of some extra cash flow, effectively managing finances can seem rather intimidating. The key to avoid overspending is figuring out how much comes in, how much has to go out, and what’s left over. Once that has been established, a few simple tricks can be used to keep hold of any financial situation.

The first thing to do is make a baseline budget. This should include all living expenses, such as rent or mortgage payments, utilities, auto and health insurance, credit card or loan repayments, and any other regular monthly expenses. It is important to also take into account how much is spent every month on necessities that do not come with a monthly bill, such as food and auto maintenance. Once a monthly expense total has been established, it is easy to determine the amount of disposable income, which is how much money is left over each month.

The next step is to determine where the disposable income goes and whether there are more advantageous ways to put that money to use. Many people have a tendency to overspend on things that are incorporated into their lifestyle. Examples of this can include dining out, entertainment, and hobbies. If it’s found that too much is being spent on unnecessary things like these, there are simple strategies that can be used to control excess spending.

It is entirely possible to get a handle on overspending without cutting out all of the extras. One of the easiest ways to control this is to use cash. Giving oneself a reasonable allowance to dine out, for instance, can be achieved by simply putting the allotted amount of cash in an envelope each month and using only that money for that expense. Once the monthly allowance is gone, it’s gone. This cash allowance method works well for most budget-straining sources, such as weekend getaways, nights out on the town, and that expensive model train habit.

A good thing to keep in mind when trying to control excess spending is that credit cards should be used for emergencies and major purchases only. While it may be tempting to charge that new fishing pole before the start of the season, remember that paying interest on an unnecessary item like that is uneconomical. It is a much better idea to start a ‘fishing pole envelope’ and deposit cash as it’s reasonably available until there’s enough for the purchase.

It’s often difficult to decide where the money should go, when there isn’t enough of it for everything one desires. The best—and simplest—way to handle this situation is to make a list. Number the list in order of importance. It’s not necessary to cut out a weekly poker game, but that may mean having to replace grabbing lunch at the deli everyday with bringing something to eat from home a few days a week.

Lastly, but arguably most importantly, it’s always a good idea to have at least some savings for emergencies. Get into the practice of depositing a specific amount of money into a savings-only account on a weekly or monthly basis. Even if there is only twenty dollars each week available for savings, it will create a good habit, and the dollar amount can always be increased as finances allow. It may seem hard to go without some of the things that have been a regular part of one’s lifestyle, but financial responsibility is certain to pay off in the long run.