(PHOTO: Amble Design/Shutterstock)
By Sarah Watts
It’s no secret: Americans are chronic overspenders. According to a recent survey by the FINRA Investor Education Foundation, 19 percent of respondents admitted to spending more than they make, using credit cards and personal loans to bridge the gap between what they earn and what they spend.
While overspending can be a huge problem, a small number of people have reformed, cut up cards and learn to live within their means. Here are six simple ways to follow suit.
Switch to cash. When Jen DuFore’s husband experienced a big bump in salary several years ago, her family still felt pinched despite the extra cash. DuFore, of Atlanta, Georgia, ran the numbers and was horrified with what she saw. “I categorized every penny,” she said. “Groceries and dining were practically an extra mortgage payment each month. I figured as long as I wasn’t buying fancy purses or jewelry that I was being smart, but I was blowing a ton of money on food.”
Shortly after, the DuFores switched to cash and started seeing the savings add up. “We use cash now for areas we are prone to overspend—so, dining out, groceries and a small amount of fun money,” she explained. “The other budget areas I’m pretty good at keeping under control, so I’m comfortable using my debit for those.”
Use apps. Jennifer Cunningham, of Houston, Texas, knows exactly where her money is going, ever since she started using apps to track her spending. With an app called “Goodbudget,” Jennifer divides her money virtually into 10 categories based on her family’s expenses, such as bills, groceries, car repairs and gas. Doing this means she’s less likely to overspend within a certain category, since when the money’s gone from one category, it can’t be borrowed from elsewhere. Using the envelopes hasn’t just curbed her spending—it’s radically changed her life. “We’ve paid off our non-mortgage debt, increased retirement savings and are halfway to paying off our mortgage,” she said.
Use a prepaid debit card. Katie Keller, of Los Angeles, California, realized she had a problem with overspending when she started racking up credit card debt and overdraft fees from her bank. In 2011, she cut up her credit cards and had her checks transferred directly onto a prepaid card. She’s been in the black ever since and is now a “big advocate” for using prepaid cards to curb overspending. “It doesn’t count towards your credit rating,” she said, which was an obvious downside. “But you aren’t allowed to spend outside your means which was always my issue. It helped me get back on my feet a lot quicker.”
Prioritize your payments. Vacations and luxury cars are typically what Americans tend to overspend on. But Steve Goodwin, of Sandwich, Illinois, learned that you can overspend in non-luxury categories as well. “We were paying off debt, saving, investing, [funding our] kid’s college, and saving for a house all at the same time,” Goodwin recalled. “I was sick of not getting any progress on our debt because we were trying to do everything all at once.” Fed up with feeling stretched at the end of the month, the Goodwins decided to take a class from author and financial guru Dave Ramsey, where they discovered their overspending in several areas at once was the culprit. “We didn’t get traction [with our debt] until we started following the Baby Steps and doing one thing at a time,” said Goodwin.
Hit up the thrift stores. A life-long Packers fan, Jim O'Malley, of Chicago, Illinois, would routinely overspend on “frivolous and pricey” sports gear, such as caps and jerseys. But when he realized his love for sports merchandise was eating a hole in his wallet, O'Malley turned to The Salvation Army to search for his favorite threads. O'Malley isn’t alone: Resale shops are one of the fastest-growing businesses in the U.S., with around 18 percent of Americans digging through the bargain bins every single year, according to America’s Research Group. It’s hard to overspend when everything costs a buck.
Have children. Children are notoriously expensive: According to a report from the USDA, middle-income parents spend an average of $12,000 on child-related expenses during baby’s first year. But for Chris Mamula, of Pittsburg, Pennsylvania, having a baby actually helped him become more frugal. Before the birth of his son in 2015, Mamula usually bought a surplus of “gadgets, musical equipment, tools—nothing that was needed whatsoever.” After the birth of his son, Mamula realized that the money he blew on frivolous purchases would be better spent on baby supplies, like formula and diapers. Mamula now allows himself a small allowance for “fun” purchases—a fraction of what he spent pre-baby.