How can I stop overspending and use my money wisely?

Ever wondered where all your money’s gone at the end of the month? You’re not alone if you’re feeling like you probably spent a bit more than you should’ve. A recent Varo survey¹ found that most Americans—a whopping 69% to be exact—have had to dip into their savings to make it to their next payday on more than one occasion.

Even if you earn a stable income, living beyond your means and not knowing how to spend money wisely can make it a struggle to stay afloat financially. 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.

So, how can you get back on track and learn to save rather than spend? Here are some tips for incorporating mindful spending habits into your everyday routine to more wisely use (or save) your hard-earned money.

Most people occasionally overspend

It’s important to note that overspending is more common than you think, and 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.

Take stock of your spending habits

The first step toward making positive financial change is to sit down and take stock of your spending habits. If you have a feeling that you’re overspending each month, there is probably a very good chance that you are.

Some signs that you’re overspending can be neglecting your bills and opting to spend money on fun expenses, or carrying a large balance on your credit card and struggling to make minimum payments.

Before you can adjust any spending habits, you need to have a solid understanding of what money you have coming in each month and where that money is going.

Start by determining exactly how much you earn. Although most people are well aware of their paycheck amount, some in more volatile industries or professions (such as those in the service industry or gig workers) may rely on a fluctuating amount month to month. If you’re one of them, it’s a good idea to average out your earnings over the past three to six months.

Once you’ve determined your earnings, take a hard look at where that money goes. How much do you spend each month? If you’re not sure where to start, check your statements over the past three months to see what your typical spending categories are. You’ll need to account for fixed and variable expenses.

Fixed expenses are bills that do not change month over month, such as rent, groceries or transportation. Variable costs are any expenses that fluctuate and aren’t essential to your day to day life, such as dining out, buying clothing, or spending on entertainment.

Now that you have these expenses sorted, it’s time to do some basic math. Don’t panic. All you need is a calculator. Take your monthly earnings and subtract them from your average monthly spend. This calculation will tell you if you have any money left over, or if you are overspending.

From there, a good way to get a clearer picture of your current financial standing is to determine your net worth. Your net worth is all your assets subtracted from your liabilities. Assets would be anything you own of monetary value or have in your savings accounts. Liabilities would be any debts or loans that you may carry.

Get to know what you value

If you’re struggling to improve how you manage your finances, it pays to take a look at your core money values. Once you determine whether your purchases truly connect with the things that you care about, you can make more effective decisions about how to use your money. For many of us, that may very well be the first step toward curbing spending, getting out of debt, and saving more.

You may already have a keen sense of your core values, but many people haven’t taken the time to reflect or even articulate on what matters most to them. Or, perhaps it’s been some time since you reassessed your values, which could have changed over the years.

Pinpointing core values can be surprisingly tough, but there are a variety of approaches that can help. If you’re looking for guidance, sometimes a life coach or a short meditation retreat can provide some clarity.

There are also DIY methods that you can start with at home. This could include writing down your greatest accomplishments and failures, as well as the things you’re most and least efficient at, then searching for common themes throughout to direct you forward.

The goal is to come up with a handful of words or short phrases that are your guiding principles. These aren’t just for financial decisions—your values should also be reflected in the way you choose to live your life and the goals you set for yourself in the future.

Compare your values to your spending

Once you’ve identified your values, it’s time to compare them to your spending. Start by gathering data on your past purchases from your bank or credit card statements.

Having each expense on its own line can be helpful, as you can go item-by-item and ask yourself, “Does this align with one of my values?” Try to answer with a “yes” or “no” rather than “maybe” or “kind of”, and then write down the value it aligns with when applicable.

Sometimes there’s an indirect relationship between a purchase and a value. For example, paying for gas may allow you to get to work, which, in turn, provides income to support you, your family, or your community. If you’re stretching too hard to make something “fit” one of your values, perhaps it doesn't. When that’s the case, you may want to reconsider making similar purchases in the future.

An even shorter version of this exercise involves simply looking at the last 5 things you bought on your debit or credit card. What do these purchases say about you? The main thing here is to identify where and when you’re living your values.

Just because we spend our money a certain way doesn’t mean it’s the right choice for us or our finances. By getting to know what you value, you may learn that you aren’t spending your time or money in places that matter most to you. This is an excellent opportunity to decide what parts of your spending should be cut out or decreased.

Find less expensive alternatives

Use the information you’ve gathered to reframe your spending, and perhaps even your lifestyle, to better reflect how you ideally want to live. You can always look for ways to cut out expenses that don’t fit. Even with purchases that you feel align with your values, consider any options that fulfill the same want or need but cost less.

If you love to go out for dinners, but can’t afford to keep up this habit, consider setting limits for how often you enjoy this non-essential expense. Perhaps you limit your dining out to once a week or once a month. Not only will you save money, but you might also be able to enjoy this experience more when it isn’t as frequent.

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.

Create a budget to curb overspending

Overspending is much easier than saving money. To spend, all you have to do is swipe your card or pull out some cash and move on, whereas saving takes more planning and patience. So, how can you hold yourself accountable to start making the right choices? It’s time to set a budget.

Since you’ve already done the leg work of determining your income and expenses, a budget can help better guide your spending and track where your money goes each month. Not only that, a budget can be a great way to stay accountable to the financial goals you’ve set, whether it’s simply managing overspending, paying down debt, or creating a longer term savings plan for the future.

If your budget is for curbing overspending and learning how not to spend money, consider the various approaches you can take for that purpose. One option is to follow a cash-based budget that limits your spending on each category merely by restricting access to additional funds. For example, if you are only allowing yourself to spend $20 per week on coffee, commit to not spending any more money on coffee once that’s gone. Budgeting tactics like this can be straightforward, but aren’t for everyone.

Whether it’s using a more traditional tracking method like a spreadsheet or utilizing a modern budgeting tool like an app, there are a variety of ways to budget that will suit your needs best. Either way, give yourself around three months to adjust to your chosen budget, and then you can reassess to see if the approach you chose is working for you.

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.

That’s why many people utilize notifications from their banks to alert them if they’re in danger of overspending or exceeding their budget.

Getting timely insight into your important bank account activity through account-related text messages, low-balance alerts, upcoming bills, or even when a paycheck has been deposited can be useful in terms of tracking your budget in real time.

Don’t be afraid to do regular financial check-ups

Just like you go to the doctor every year or two to get a check-up on your physical health, regular money check-ups can be useful for your financial health. When it comes to saving and spending, you need to hold yourself accountable. If you find it difficult to control your overspending, consider finding an accountability buddy that you can call or text whenever you get the itch to spend money.

If you’d prefer to keep your financial life to yourself, set a phone reminder to go off as often as necessary as a way to stay on top of those moments of weakness. Overspending money is sometimes tied to our moods and emotions. So, if you feel as though you are more likely to spend when you’re feeling down, try to practice the 24-hour rule when making purchases, and give yourself time to think about the decision to spend before it’s too late.

Overspending can be, well, overwhelming. Understanding why you’re overspending, assessing your spending against your core values, and sticking to a budget are the first steps towards empowering yourself to be more mindful of your money. 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.