Avoid Overspending With These Strategies

Sometimes, when the going gets tough, even the toughest among us go shopping. Why is that? Buying something we want can trigger the feel-good endorphins in our brains that give us a boost, at least in the short term. But treat yourself one too many times, and you can end up living above your means, which can potentially lead to living with high-interest credit card debt. 

Carrying Dept Month to Month?

Unfortunately, research shows that about half of Americans with credit cards carry debt from month to month, likely because they can’t afford to pay off their accounts in full at the end of each billing cycle. If this sounds like you, or someone you know, take heart. 

There is Hope. The good news is, there are strategies you can use to avoid the pitfalls of such debt, specifically high-interest debt from credit cards, so you can ultimately save some money (by avoiding interest charges) and steer clear of the mental stress that can come from living under a mountain of bills. 

SavvyMoney Tip: Many of these same strategies can also help you dig yourself out of debt if you are in that situation. 

Consider these practical tips from financial experts to help you avoid falling into high-interest debt. 

1. Only Use Cash

One way to keep from overspending is by using cash instead of debit or credit cards to make purchases, says Samantha Mockford, CFP, an associate wealth advisor with Citrine Capital in San Francisco. While this may not work for all of your monthly bills, you can certainly use this method for weekly incidentals and even groceries.

Here’s how to do it:

• After you get paid, pull a certain amount of cash from your checking account to cover your expenses.
• Only use cash for all your expenses.
• When the money’s gone, it’s time to stop spending.

2. Create a Spending Plan (or Budget)

One key to achieving your financial goals is to know where your money is going every month. That’s why Mockford also works with clients to develop spending plans based on their goals and values. Those spending plans, or budgets, should include the following:

• Your monthly bills
• Regular expenses
• Long-term savings
• Irregular-but-expected expenses (such as replacing electronics, car repairs, and travel).

“If you choose to take on (more) debt,” she says, “confirm through your budget that you can make space for this new monthly bill.”

3. Build an Emergency Fund

Eric Roberge, CFP and founder of Beyond Your Hammock, stresses to clients the importance of having an emergency fund – or rainy day account – to fall back on when life happens. “Keep an emergency fund of at least three to six months’ worth of expenses and keep this cash somewhere other than where you have your main checking and savings accounts.”

Separate Account

The reason for a separate account is this: “Out of sight, out of mind,” Roberge says. “Keeping your money for emergencies in a different account that you’re not constantly looking at anytime you log into your main online banking portal can help you keep that fund intact and available when you need it for an unpredictable emergency that you might otherwise have to take on some debt to handle.”

4. Learn to Live Below Your Means

I have been sharing this advice for years as a way to help people get out of debt and stay out, for good. Live below your means is Money Rule No. 10 in my book “Money Rules: The Simple Path To Lifelong Security.” If you’re not sure exactly what that looks like, here are some examples of living below your means as a way to save and invest more for your financial future: 

• Buy a smaller home or rent a smaller apartment than you can afford. 
• Purchase used vehicles instead of new ones.
• Never pay full price if you can help it: Shop sales on everything from meat to sofas and shoes.
• Save your raises by moving the amount of a pay increase into your 401(k) or IRA.
• Get a library card so you can check out books and stream movies for free (or really cheap).

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1. Cut Back

There’s a good chance you’re paying for some things that you don’t even use. Here are some ways to cut back:

• Get your bank and credit card statements
• See what services, memberships, and subscriptions you can eliminate
• Cut any services that you don’t need or haven’t used in months

Remember, this isn’t a permanent change. You can always add them back later down the road if you find that you miss them.

2. Contact Companies

Another way to reduce your monthly bills is to call the companies and lenders and ask for deals and discounts. This can work with the following:

• Cell phone provider
• Cable TV or Satellite provider
• Car Insurance
• Homeowners’ or renters’ insurance
• Credit card companies
• Internet provider
• Utilities (only if there are multiple options in the market)

Most of the time, there are deals to be had; you simply need to ask. If they don’t present a discount, threaten to leave for another provider. That will likely do the trick.

3. Pay Down Debt

It’s hard to manage monthly bills when you’re also dealing with debt.

• Pick a debt payment strategy and stick with it.
• We suggest the avalanche method, where you pay down the highest interest debt first.
• The most important thing, though, is picking a strategy that works for you.

Do One Thing: Reduce your monthly bills by cutting out services that you don’t or rarely use.

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Home Updates That Add Real Value

Try these home improvement projects to add the most value

Have you started thinking about home improvement projects? You want to do some updates, but you don’t want to just do any update. The fact of the matter is, there are some projects that reap better returns than others.

Here are three home improvement projects that add plenty of value. If you sell your home, these are most likely to boost the selling price. And if not, they will improve your home without busting the budget.

1. Update the Kitchen

If you do it right, you can update your kitchen and receive a positive return on your investment (ROI). It doesn’t have to be a complete remodel. Consider doing the following:

• Replace countertops
• Update cabinets
• Adding storage space

If you do want to go big, a study from the National Association of the Remodeling Industry found that the average return on a kitchen remodel of $28,000 was about 70 percent. 

2. Revive Your Floors

Speaking of going big, updating or adding hardwood floors to your home is expensive, but it also comes with a big ROI. The same report found:

• Spending $3,400 to refinish hardwood floors could increase your home’s value by $5,000, which is a whopping 147 percent ROI.
• If you don’t have hardwood floors and you install them, they add an average of $6,500 to a home; a 118 percent ROI.

3. Replace The Doors

Simply replacing your front door is not only one of the easiest home improvement projects, it also adds a ton of value. According to a recent report:

• Adding a new front door has an average ROI of 488 percent.
• If you have a garage, replacing the door will reap a 93 percent ROI.

Whatever home improvement project you decide on, make sure you don’t break the budget doing it.

Do One Thing: Start small when considering home improvements. You don’t need to break the bank to increase your home’s value.

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