Why am I overspending?
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Wondering where all your money went at the end of each month? You’re not alone if you’re feeling like you probably spent a bit more than you should’ve.
According to a recent Varo survey on spending habits conducted by Propeller Insights1, most people don’t know how much they spent on going out with friends, on travel, or on Lyft and Uber rides during the previous month. Only slightly more than half (51%) know how much they spent on bank and credit card fees.
But there’s no judgment here—overspending happens to even the best of us from time to time. The trick is to better understand your spending habits so that you can be smarter with your money moving forward.
Most people occasionally overspend
It’s important to note that overspending isn’t relegated to a single generation—85% of surveyed Americans said they sometimes spend more than they should. But, making a regular weekly or monthly habit of overspending can have some negative long-term consequences for financial health.
In addition to finding that you can’t cover all your expenses or make necessary purchases, you may not be able to save for an emergency fund if you don’t have much money left at the end of the week or month. Not having a financial safety net during an unexpected setback may mean you have to turn to high-interest loans or rack up credit card debt, which can be costly and may hurt your credit.
So what gives? What is causing people to overspend?
Is retail therapy to blame?
Reasons for overspending vary for everyone, but nearly half of surveyed Americans (49%) say they occasionally indulge in “retail therapy”, or using shopping to boost your mood.
A small, spur-of-the-moment purchase here or there may not affect your budget much, but they can add up over time, especially if retail therapy is your go-to when you have a bad day. Take a look at your most recent purchases and ask yourself whether each was a “want” vs. a “need”.
Likewise, recognizing what triggers your desire to shop could help you redirect your reaction and help stop you craving the short-term thrill of spending money. The 59% of millennial respondents who partake in retail therapy say it tends to be the result of the following:
Family stress (30%)
Having a bad day (29%)
The general state of the world or politics (25%)
Not all retail shopping is frivolous, though—some people (2%) find solace in buying things they need anyway. But most don’t make such pragmatic decisions, and over a third of Americans (36%) regret their purchases later.
It’s not a big stretch to say that there are probably better uses for your money. Try skipping that next urge for a “therapeutic” purchase and transfer an equivalent amount of money into your savings account. You may find you get a similar feel-good reaction in the moment, as well as the peace of mind that you’re building towards your long-term financial goals.
If you’re looking to start saving, the Varo Savings Account offers a high annual percentage yield (APY), no fees, and easy auto-saving tools to help you grow your money.
A small reminder could make a big difference
The difference between making a purchase that you’ll regret and saving your money for something more meaningful can be as simple as a nudge—or red notification bubble—in the right direction.
Most people (76%) would like their banks to send a notification if they’re in danger of overspending, and nearly 3 quarters (72%) of people said that the reminder would help keep them from spending money.
Americans also say banks could help their customers by sending other account-related text messages. More than half (51%) would find low-balance alerts helpful, 33% want to know about upcoming bills, and 28% would like a notification when a paycheck or other income is available.
In short, getting a helping hand with timely insight into important account activity (without having to log in) is top of mind for many Americans.
Understanding why you’re overspending is the first step towards curbing it in the future. By getting a handle on your spending, you’re not just avoiding the stress of missed bills or damage to your credit, you’re also setting yourself up for better financial wellbeing in the long term.
1 2018 survey for Varo conducted by Propeller Insights of 1,000 Americans asked about their spending habits and how banks could better serve customers.
Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.
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