Most of us enjoy occasional splurges where we buy new things for ourselves – that’s normal. However, for some people, that rush grows into an addiction where they find themselves buying things they scarcely want just to chase that rush.
A few sure signs of a spending addiction include buying things that you know you don’t really want, having a sense that a day isn’t complete without spending money, having lots of unopened and unused items at home because you don’t have the time to enjoy them, and rarely having adequate money in your checking account (usually paired with high credit card balances).
Once upon a time, I had a spending addiction myself. Over the years, I’ve broken that addiction. Here are 10 key steps that worked for me – and can work for you, too.
Be Honest With Yourself About Your Problem
If those “sure signs” listed above sound pretty familiar to you, it’s very likely that you have a spending addiction of some sort. That spending addiction is a real problem, as it’s keeping you from being financially successful.
The first – and probably the most important – thing you can do is admit to yourself that you have a real problem when it comes to spending. Many people choose to deny that they have an addictive problem for a number of reasons. Some actually want to continue in their addiction; others may want to maintain a self-image of some kind; some do it because spending money covers up a hole in their life; others might simply not see the signs at all, whether by choice or otherwise.
Whatever the reason, be honest with yourself. Admit that you have a problem. Doing this truthfully with yourself is often like flipping a switch, one that changes how you see your life and the choices you make.
Figure Out Whether You Genuinely Want to Change
Simply admitting that you have a problem, however, isn’t enough. For some people, their attachment to spending is more important to them than the benefits of breaking it.
Do you genuinely want to change? Is the thrill of buying something really worth the negative feelings you get from looking at your bank account and the unused stuff around your house?
Without a genuine desire for change, changing your financial habits is utterly impossible. You have to want that change.
Lasting change in a person’s life comes from two key ingredients: motivation, which is what gets you started, and discipline, which is what keeps you sticking with it. Without that core motivation to get started, you can’t change. Without that internal desire to change yourself, you’re lacking that core motivation.
Tell Those Closest To You About Your Problem, and Ask for Their Help
It can be really difficult to open up about a personal problem. Trust me, I know – some of the greatest personal challenges in my life have been ones that I’ve been hesitant to discuss with people in my life, even my wife.
However, if that other person genuinely loves you and deserves you, they will step up to the plate and help you with your goal in whatever way they can.
They’ll motivate you. They’ll do what they can to make positive choices easier for you. They’ll directly help you maintain the discipline you need to get there. Not only that, simply telling someone you care about what your goal is – and knowing that they’re watching you – becomes a powerful motivator and reinforcement for personal discipline.
Sarah is often a powerful supporter of my personal goals when I share them with her – and I support her goals, too. My closest friends will do the same, though without the intensity of Sarah.
Make a Full and Truthful Inventory of Your Recent Spending
We’ll often have a sense of how bad our spending decisions are, but we often don’t really know how bad they are. We’ll forget things or we’ll tell ourselves that things really aren’t all bad and that becomes enough for us to not really make any real changes in our life.
The best way to break through this barrier is to simply make a full and truthful inventory of your spending over the last three months or so. The easiest way to do that is to take all of your credit card and bank statements for those periods and go through those transactions step by step.
For a basic first step, try to divide all of the purchases into “essential” and “nonessential” purchases. Try hard to be realistic about this difference – basic food, clothing, and shelter are essential expenses, for instance, but high-end foods and restaurant meals are nonessential. All entertainment and hobby expenses are nonessential.
Once you’ve done that, look at your total nonessential spending. That’s how much you spent on unnecessary things in the last three months. Likely, that total amount is a shock to your system. It should be.
Imagine what even half of that money could do for other aspects of your life. Your debt begins to melt quite quickly. You can start saving for retirement. You can start saving for a down payment. You can do all of it if you just trim your nonessential spending in half.
Identify Patterns in That Inventory
One good way to get started on that kind of trimming is to look for some patterns in that inventory. Start sorting all of those expenses into groups that make sense to you.
One group might be meals eaten at restaurants; another might simply be fast food. Another group might be one of your hobbies, and a fourth group might be another hobby. You can choose the groupings however you’d like. Just look for things that your nonessential purchases have in common.
What you’ll soon see is that you don’t really overspend too much in some areas, but in others… wow. A lot of money vanishes in a pretty short period of time.
The example I like to use for this phenomenon is my own spending at the convenience store that was near the apartment where Sarah and I used to live. I used to walk over there each evening and buy a bottle of Gatorade and usually some small snack, like a bag of peanuts, and talk to the sweet elderly lady that worked behind the counter. I didn’t think much of it – the expense was always less than $5 – but if you figure that I basically did that every day when I wasn’t traveling, it added up. If you figure I averaged a $4 expense there and I went there 25 days per month, that’s $100 per month on Gatorade and peanuts.
Let me repeat that: $100 a month on Gatorade and peanuts.
There’s nothing whatsoever wrong with stopping for an occasional treat, but when it reaches that kind of routine, it eats you alive.
Put Strong Roadblocks in the Way of Those Patterns
Let’s keep digging into that “Gatorade and peanuts” example. Even if you assume that I really needed to drink 25 bottles of Gatorade a month and eat 25 small packages of peanuts, I could have just bought a bunch of Gatorade in bulk and a big container of peanuts at the warehouse club and saved 50% of the cost and still stopped in each day to say “hello” to that friend of mine.
That’s the kind of pattern you’re looking for – a pattern that you can tweak or cut back on without losing too much quality of life. If you are sincere about that, you’ll find a lot of patterns – and you’ll find a lot of ways to stick roadblocks in the way of those patterns.
I’ve mentioned a lot of these roadblocks on The Simple Dollar.
I used to often stop at a bookstore on my way home from work. I put a roadblock in the way of that by changing my route to go home, heading to the interstate directly instead of meandering through town to the next exit.
I used to stop for coffee and a bagel before work at this nice little coffee shop. I put a roadblock in the way of that by using my new commuting route, drinking coffee at work, and then eventually dropping the habit.
I used to buy Kindle books all the time. I put a roadblock in the way of that by deleting my Amazon password from all of my web browsers and removing my credit card number from Amazon.
I used to buy board games frequently from this one great online seller. I put a roadblock in the way of that by deleting my password from that seller and then changing the password to something really complicated that I couldn’t easily remember.
Roadblocks drastically slow down the purchases that you make routinely, causing you to make them less often and think more carefully about them when you make them.
Make a Full and Truthful Inventory of Those Who Are Negatively Affected By Your Addiction
The list of negative impacts of a spending addition on the addicted person is very long. They lose the ability to become debt free. They lose the ability to really enjoy and savor all of their purchases. They lose the ability to strongly save for retirement. They often introduce undue stress into their lives.
It’s easy to see the negative impact of your spending on your own life, but it often spreads out into the lives of the people around you.
Do you have a spouse? Every dollar that you’re overspending is a dollar directly taken out of your spouse’s pocket. It reduces your spouse’s ability to save for retirement. It reduces the ability of your partner to enjoy small splurges. It adds stress to your partner’s life, whether you see it or not.
Do you have children? Every dollar that you’re overspending affects your children, too. It takes away growth opportunities in their childhood because you can’t afford them with the remaining money after your overspending. It takes away from their college savings. If you’re stressed, it has a negative impact on their life and well being.
Do you have friends? Your own overspending is likely making them feel competitive with you in some ways, causing them to overspend and run into financial troubles, too. Other friends may not feel as connected to you because you don’t seem to share their values when you spend wildly.
Do you have elderly relatives who may be depending on you, such as ailing parents? Your overspending may be impacting their care. Maybe it’s directly, meaning that you don’t have adequate money to care for them. Maybe it’s indirectly, meaning that the stress from dealing with the consequences of overspending is altering their care.
Your overspending issues impact the people around you in a myriad of ways, both directly and indirectly. Those people need you to get a grip on your spending.
Plan for How to Make Things Right for Each Person Negatively Affected
Once you’ve thought about all of the people impacted by your spending, think about how correcting your overspending could actually have a great positive impact on your life.
For your spouse, it will probably reduce the personal stress in his or her life. It will likely also reduce some of the strain on your relationship. It will give your spouse a little more freedom to spend money on things they enjoy. It may give them the space to save more for retirement, too.
You can strengthen that rift by simply talking to your spouse about the changes you want to make, then embarking on those changes and actually walking the walk. The forward progress you make in the eyes of your spouse will have a tremendous impact on making things right.
For your children, cutting back on non-essential spending will reduce the secondary stress that they feel. You can also start doing things like increasing their educational opportunities and perhaps even saving for their college education.
You can increase the impact by spending more time with them when you’re not feeling stressed out by life, which will do nothing but improve your relationship with them.
For your friends, cutting back on frivolous spending will let them get some breathing room in any “keeping up with the Joneses” race they may feel with you. Also, low-spending habits can make more people feel comfortable hanging out when they realize they don’t need to spend big cash to do so.
You can get this ball rolling by suggesting low-cost activities to your friends, like having a dinner party or watching a movie together or going to a free concert or something like that. You can also try building a friendship with new people by using these low-cost activities. It’s pretty hard to say “no” when someone invites you to their home for dinner, after all.
For your older relatives, they’ll feel less stressed about the stability of the care and assistance they may need and less secondary stress from the way you’re behaving.
You can do this best by simply spending more low-stress time with the elderly people you care the most about. Time is one of the most valuable things you can give to the older people you care about.
Start making things right in the relationships in your life and you’ll be incredibly glad that you did.
Establish a Strong Debt Repayment Plan
One of the most important financial moves you can make for yourself once you commit to spending less is to give yourself an alternative way to sink your money that improves your financial state. A debt repayment plan is perfect for this – you can toss lots of money in there and it helps your finances out a lot.
A debt repayment plan is simple. It’s just a list of all of your debts, ordered by interest rate with the highest interest rate at the bottom.
All you do is commit to making minimum payments to each debt on that list without growing any of them, then making a larger additional payment to whatever debt is on top of that list.
So, let’s say you have a $20,000 student loan debt at 6% and a $10,000 credit card debt at 20%. Your minimum payment on the student loan might be $150 and your minimum payment on the credit card might be $200. That’s $350 in minimum payments. Now, let’s say you’ve managed to cut back on your spending and now have an extra $200 a month to improve your future. You apply that extra $200 a month to the credit card payment, so you’re paying $400 a month instead of $200 a month.
With just that simple move, you move from paying off that credit card in 109 months to paying it off in 33 months. If you can find another $200 a month, that changes it to just 20 months.
After that’s paid off, you can throw the full payment from the credit card into an extra payment on the student loan. So, if you were paying a $200 minimum payment and a $200 additional payment on the credit card, you can now make a $400 additional payment on the student loan. Because of that, instead of paying off that loan in 221 months – about 18 years – you’ll pay it off in 41 months – just a smidge over 3 years. Add another $200 to that payment and you’ll have it gone in 29 months – just a smidge over two years.
In other words, if you don’t make extra payments, it would literally take you almost two decades to eliminate both loans. If you make a $200 extra payment on the first debt and carry all of that over to the second, you pay the whole thing off in just shy of six years. If you make a $400 extra payment, you’ll pay the whole thing off in four years.
That’s the impact of a debt repayment plan, and it’s something you can harness when you get your spending under control. The spending you cut back on becomes the rocket fuel for that debt repayment plan.
Establish a Healthy Simple Budget That You Can Stick To
For most people, the primary benefit of a budget is that it gives them a real picture of their finances, something you did earlier on in this plan. However, there’s still another benefit in continuing to assemble a budget – you can give yourself a spending cap on the non-essential areas of your life.
For myself, I have a spending cap each month for non-essential spending. All of my hobbies come out of that spending cap and, if I don’t have enough, the purchase waits until next month. However, if I still have money here, I can buy whatever I want related to my hobbies. It’s basically a line item in my budget.
Putting that cap on my non-essential spending was almost revolutionary to me. It might seem constraining at first glance, but it actually had a secret benefit: that spending was guilt free.
Whenever I spent money on non-essential things before, I always felt a pang of guilt because I knew that money was taking away from something else I needed to be doing in my life. I wasn’t saving for retirement, so I felt guilty. I wasn’t paying off debt, so I felt guilty. I wasn’t saving for educational expenses, so I felt guilty. My overspending was letting down other areas of my life.
Once we started budgeting and I knew that I was covering all of those things and I had some money left over for non-essential spending, I didn’t feel guilty any more about spending that money. I knew that my bases were covered.
It feels great. Sure, I don’t have as much to spend freely as I once did, but I don’t feel guilty about what I spend. That allows me to enjoy the things I buy with that money far more than before and that enjoyment tends to really last, whereas before it would be clouded with a bit of guilt.
Many of the strategies for defeating a spending addiction are pretty similar to those that you use to defeat any other addiction. It starts with honesty with yourself and builds to having responsibility toward others and having a plan in place to keep yourself honest.
Overcoming a spending addiction is one of the most powerful things you can do for your own finances. Good luck in your journey if you choose to take this road.