You’re not alone if you don’t know exactly where you spent your money but you’re pretty sure you spent more than you should have last month.
A recent survey from Varo conducted by Propeller Insights of 1,000 Americans asked about their spending habits and how banks could better serve customers.
The survey shows most people don’t know how much they spent on going out with friends, travel, or 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. (P.S. It’s a lot of money to not know about! Americans spent $34.3 billion on overdraft fees alone in 2017.)
But even if they’re not sure where the money goes, more than half of millennials say they know it was too much and admit to overspending every week or every month.
Most people occasionally overspend
First, 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, as most millennials do, could have pretty bad long-term consequences for financial health.
You may not be able to save up an emergency fund if you don’t have any money left over at the end of the week or month, and therefore might not have a financial safety net during an unexpected setback. The alternatives, such as short-term loans, credit card debt, and missing bill payments, 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 can vary, but nearly half of surveyed Americans (49 percent) say they occasionally indulge in “retail therapy”—using shopping to lift your mood.
A small frivolous purchase here or there may not affect your budget much. However, you may want to second guess every unnecessary purchase if you’re consistently overspending. Recognizing what triggers your desire to shop could help you redirect your reaction.
The 59% of millennial respondents who partake in retail therapy say it tends to be the result of:
- Family stress (30%)
- Boredom (29%)
- Having a bad day (29%)
- The general state of the world or politics (25%)
Not all retail shopping is frivolous. 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 may be better uses for your money.
For example, you could forgo a “therapeutic” purchase and transfer an equivalent amount of money into a savings account. You may get a similar feel-good reaction in the moment, and you can build towards long-term goal that better matches your values.
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 could 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 three-quarter (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, timely insight into important account activity without having to log into their accounts.
The more you know, the better you could spend—and the better your long-term financial plan could be.
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