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I’m a Financial Planning Expert: Here Are the Top 8 Things People Overspend On

oatawa / iStock.com
oatawa / iStock.com

When you’re caught in the throes of wanting something, whether it’s a shiny new gadget, a dinner out with friends, or even just a deserved upgrade to our wardrobes, it’s easy to forget about your budget and just give in to the urge to spend.

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How you spend money can often be more emotional than logical, leading to overspending on things you might not need or that would be more prudent to wait to purchase.

GOBankingRates spoke to two financial planning experts, Khwan Hathai, a certified financial planner and certified financial therapist at Epiphany Financial Therapy, and Skyler Fernandes, a financial expert at VU Venture Partners.

When it comes to exceeding budgets, Hathai said, this is often related to the kind of money mindset you have. To stop overspending “requires a thoughtful shift in money mindset — from seeing spending as a momentary pleasure to viewing it as a strategic decision aligned with one’s financial vision.”

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Dining and Subscriptions

Eating out and subscriptions are two areas where expenses can quietly mount, Hathai warned. She urged a “proactive approach” that involves a mindful allocation of funds.

“By setting intentional limits on these categories,” she said, “individuals can indulge responsibly without compromising their financial goals. It’s about appreciating the experience over the expense.”

Fernandes suggested extending your subscription audit beyond entertainment services to include professional memberships, software subscriptions and even monthly delivery services.

“You might find areas where consolidation or cancellation can yield substantial savings,” he said.

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Tech Temptations

Hathai explained that the draw of the latest tech gadget “often speaks to a desire for the newest and best,” but shifting this perspective to one of value “can significantly curb unnecessary spending.”

She encourages a “use what you have” mentality, which she feels reinforces a more practical approach to technology.

Fashion Spending

You’re not alone if you have the urge to buy new clothing frequently. Hathai said “fast fashion entices with trends and deals.”

However, you can get out of this cycle, she said, “by adopting a quality over quantity mindset and considering the longevity of each item,” which allows you to build a wardrobe that resists the cycle of constant turnover and supports more sustainable spending habits.

Impulse Buys

The phrase “retail therapy” didn’t come out of nowhere. Impulse buying often makes us feel temporarily better by distracting us from our burdens with something new.

However, Hathai warned that doing so often fills an immediate emotional need rather than a practical one.

She said, “Instituting a mandatory pause to contemplate the necessity and long-term value of an item can help ensure that every purchase is intentional and meaningful.”

The Small Coffee Habit That Adds Up

While everyone knows daily coffee runs can dent your wallet, the long-term impact can also be underestimated, according to Fernandes. You don’t have to suffer caffeine withdrawal, however.

“Instead of simply cutting out your caffeine fix, try exploring subscription services for high-quality coffee beans,” he said. “Purchasing in bulk online and brewing at home not only saves money but also elevates your coffee experience.”

Credit Card Perils Beyond Interest Rates

Credit cards may not be a “thing” you overspend on so much as a method to overspend with, but they contribute to the problem. In addition to commonly discussed interest rates and annual fees, Fernandes said, credit cards harbor lesser-known pitfalls.

“Dynamic currency conversion, for instance, is a sly mechanism that can inflate costs when using your credit card abroad,” Fernandes said.

He suggested you always opt to be billed in the local currency to avoid unnecessary charges.

“Additionally,” he said, “take advantage of lesser-known credit card perks, such as extended warranties on purchases, to potentially save on replacement costs for certain items.”

The Utility Bill Dilemma

Another area where you may be overspending, and not in the way you think, is your utility bill, Fernandes said.

“Often overshadowed by larger expenses, utility bills can stealthily drain your resources,” he said. “Many people overlook the impact of outdated appliances on energy consumption.”

He suggested investing in energy-efficient appliances, conducting regular energy audits, and exploring time-of-use plans offered by utility providers to optimize your electricity expenses.

To address your overspending issues, Fernandes urged two tips: One, use the cash envelope approach.

“Allocate a fixed amount in cash for daily expenses like groceries, dining out and miscellaneous purchases,” he said. “This tactile approach creates a tangible limit, making you more mindful of your spending habits.”

Second, automate savings for “hidden” expenses, he urged. In other words, create automated savings specifically earmarked for irregular or hidden expenses.

“This fund can act as a financial cushion for unexpected events like car repairs or medical co-pays,” he said, “minimizing the impact on your primary budget.”

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This article originally appeared on GOBankingRates.com: I’m a Financial Planning Expert: Here Are the Top 8 Things People Overspend On

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