How to manage your spending

Quick insights

• One way to help manage your spending is to create a budget.
• You may be able to curb overspending by setting financial and savings goals.
• Influences such as the desire for immediate gratification can make it more challenging to manage your spending.

Learning how to manage your finances is a skill that takes time and practice. But if you feel like you’re constantly spending more than you should, you may be looking for ways to get more control of your money. Read on to learn about different ways to manage your spending habits and tips for reducing overall spending.

Understanding your spending habits

Understanding your spending habits is generally the first step in getting control of your spending. If you’ve been using a budget, you may already be one step adead.

If you don’t have a budget, tracking your expenses over the past few months should give you a sense of how much you're spending on everyday expenses, bills, debt and discretionary items. A review of your expenses may uncover patterns and provide insight into how much you’re spending on wants versus needs:

• Needs are your essential expenses. These are line items in your budget you might pay every month, like your living expenses.
• Wants are not essential expenses. They are more often tied to your lifestyle and what you may choose to spend money on.

Differentiating between these two spending categories —wants and needs—may take some introspection. For example, some people might consider a gym membership a want while others may consider it a need.

But regardless of how you categorize your spending, creating a budget is one way to help gain control of your spending.

The psychology behind spending money

Whether you realize it or not, there are psychological factors that may influence your spending habits, including:

• Instant gratification: Instant gratification is the tendency to prioritize immediate pleasure or satisfaction over long-term financial goals. It can be easy to lose sight of how much you’re spending when you’re frequently giving into small temptations.
• Emotional spending: Spending money can sometimes correlate to how we are feeling—whether it’s good or bad. Some people may justify purchases to celebrate milestones (like a work promotion) or use spending as a way to make themselves feel better when they’re down.
• Social pressures: In social situations, you may feel more pressure to spend money. For example, if your friend group is going out to eat, you may want to join.

Identifying spending trends and temptations is one way to help manage your finances. Identifying these patterns may help you be more in control when you’re faced with spending triggers.

Ways to train yourself to stop spending money

There are strategies you can implement to help develop a more mindful approach to spending, such as practicing delayed gratification, budgeting and setting financial goals.

The 30-day rule

The 30-day rule is one strategy to help control impulsive spending. This rule implements a 30-day waiting period before making a non-essential purchase. By waiting, you may be able to cut down on making impulse purchases.

Budgeting apps

Many budgeting apps can link to your checking account and automatically track and categorize your purchases. These apps often include tools that break down your spending and display it in ways that may help you identify areas for improvement. They also may be able to track whether you’ve exceeded the amount you set for any given budgeting category, so you know when to rein in your purchases.

Set financial goals

Following a budget may be easier if you have specific financial goals. When you have your eyes set on something in the future—and track your progress toward that goal—this focus may be a powerful tool to curb spending. A purchase becomes more than an in-the- moment decision when it is tied to a long-term goal.

Tips to reduce spending

There are many ways to be more mindful of your spending and in turn reduce some of your expenses. Some common ways include:

• Creating a budget and sticking to it
• Meal planning instead of going out to dinner
• Reviewing and canceling unnecessary subscriptions and services
• Exploring free or low-cost alternatives to some expenses (like using your local library instead of buying books)
• Negotiating rates or shopping around for better rates on things like insurance premiums

Regardless of the actions you take, it is generally beneficial to conduct regular financial check-ins to help monitor your spending and adjust your budget as needed. Budgets fluctuate, and regular reviews may help you be more responsive to your changing needs and spending patterns.

In summary

Managing your spending takes some planning and discipline, especially if you’re looking to reduce expenses or stop overspending. Examples of practical strategies to prevent impulse spending include following the 30-day rule and setting financial goals. You may also benefit from creating a budget to help keep purchases in check and reduce some of your expenses.