As consumers, we constantly face the urge to spend money. Some individuals can follow their budget to a “T” and avoid overspending, whereas others may go overboard. Here at Chunk, we believe that every person can save money and reach their long-term goals if they have the right resources. Our platform features robust tools that help you save money, including a subscription tracker [ew1] and debt simulator[ew2] . You can also set up notifications and receive spending alerts [ew3] every time you make a transaction over a certain amount.
Do you want to improve your finance? Here are six ways to avoid overspending:
Make a Budget
A budget is essential to managing your finances because it lays out your monthly income and expenses. Many individuals use the 50/30/20 rule when creating a budget, meaning 50% of their income goes towards needs (i.e., housing), 30% towards wants, and 20% towards savings or debt.
The standard budget typically includes:
- All sources of income (W2 salary, dividends, etc.)
- Housing
- Transportation
- Insurance
- Utilities
- Debt
- Child care
- Groceries
- Entertainment
- Debt repayments
You should also set aside 3 – 6 months of living expenses in an emergency fund in case you run into an unexpected expense.
Monitor Your Spending
Making a budget is one thing – sticking to it is another. It’s not a crime to go a couple dollars over budget, but it’s vital to remember that a few dollars here and there could impact your long-term goals. At the end of each month, look at each month’s spending categories and see how your actual expenditures compared to your budget.
Our platform enables you to define multiple monthly budgets and see how your actual spending stacked up to your budget. Your transactions automatically flow into your dashboard using our secure Plaid integration. You can go a step further and look at how much you spent in each category, including entertainment, housing and utilities, shopping, and health and wellness. If you want to dig into the details and see your spending at the granular level, you can effortlessly download up to two years of transactions across multiple accounts. A critical element to budgeting is understanding where you need to make tweaks, and our platform gives you all the tools and resources to do so.
Pay Yourself First
Paying yourself first is an excellent strategy to help you avoid overspending because it enables you to stow away cash strategically. You essentially put a percentage of your paycheck into a savings account, 401(k), IRA, or another personal investment account when you pay yourself first. This technique to avoid overspending is most effective when your employer automatically deposits the funds into the investment vehicle. In fact, most modern payroll systems can split direct deposits into multiple bank and investment accounts.
Could you get your hands on this money and spend it? Yes, there’s typically always a way to get a hold of the funds and use them for vacations, luxurious purchases, and your favorite designer clothes. However, if you withdraw funds from a 401(k) or traditional IRA early, you’ll have to pay a penalty and lose the tax advantages. Thus, paying yourself first is highly effective because you’ll face repercussions if you can’t abstain from saving your money.
Understand Your Triggers
Shopping is like an addiction for some people, and certain places and things could trigger them, increasing their temptations to spend money. For example, imagine that you’re a massive fan of Apple products and you have to go to a mall where there’s an Apple store right at the entrance. Because you love Apple so much, you can’t merely walk past the store without going inside to check out the latest iPhones and MacBook’s. Unfortunately, you usually can’t leave the store without buying at least one item.
The above scenario is a perfect example of a triggering event. You can’t avoid all your triggers, but you can learn to cope with them. Instead of going through the mall entrance near the Apple store, you could find an alternative way in (even if it’s a longer route). This same situation frequently happens in social settings, such as bars and restaurants. An excellent technique to avoid overspending is to leave your credit or debit card at home and only bring cash with you.
Reevaluate Your Subscriptions
Did you know that the average consumer spends approximately $273 per month on subscription services? Not only that, but around 84% of consumers underestimate how much they’re spending on subscriptions. Be it a gym membership or streaming service; there’s probably a handful of things you pay for but don’t use. If you’re on the fence about canceling a service, think about the last time you used it. If you can’t remember the last time or only use it once or twice a month, it’s probably best to cancel it and save money.
Identifying your subscriptions tends to be a tedious task, primarily if you use various debit and credit cards to pay for them. After securely connecting to our platform via Plaid, you can instantly see your current subscriptions on the dashboard. The subscription tracker includes the merchant’s name, subscription amount, and billing frequency. You can also visit the spending page, where you can see how your subscription expenses compare to the rest of your expenditures.
Set Up Spending Alerts
Our platform allows you to set up spending alerts, so you’re constantly reminded every time money leaves your bank account. The alert feature is highly customizable; you can opt to receive a text and email when you make a transaction over a certain dollar amount. You can also choose to receive a notification when you incur an overdraft fee, receive money, or have a balance update. Our platform also allows you to choose how often you receive a notification (either every occurrence or every day).
Are you ready to stop overspending and finally reach your long-term financial goals? Sign up for Chunk for free and get on the track towards financial freedom!
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