Overspending can be every bit a habit as drinking or smoking. While you won't die from overspending, it is deadly for your financial health.
The big question though, is how to just say no?
Look at root causes
Dr. Simon Rego, director of psychology training and the CBT Training Program at Montefiore Medical Center/Albert Einstein College of Medicine, as a cognitive-behavioral psychologist works with people to help them examine the role that problematic thoughts, behavioral patterns and emotions can play on overspending and how to change them. He offers insight. “Start monitoring the behavior. Write down what you want to buy, why you want to buy it (thoughts), how you are feeling before you buy it (emotions), and how much it costs – as well as how you feel and what you're thinking after (if you end up buying it),” says Rego. This not only will give you a clue into what may be triggering the overspending, for example, discovering that it often occurs when you're in a bad mood, but at times, having to write it out first may slow things down just enough to deter an impulse.
Mackey McNeill, CEO of Mackey Advisors, asks clients with spending issues to get in touch with what spending money provides them. “I have them list everything they want. Everything they can dream of, having, a big house, new car, down to new clothes, etc. Then I ask over and over, what does that provide? Whatever their first answer is, I say what does that provide and so forth? We go over every item until it is clear they all provide one thing. I have clients tell me things like love, joy, always something deep and esoteric.”
Challenge problematic thoughts
After self-monitoring, you may notice a theme in what you think before overspending, “This will make me feel better, or it's on sale, I'll never get a deal like this again.” Rego says to practice challenging these type of overspending-inducing thoughts by putting them “on trial” and “cross-examining” them the same way a lawyer would do. For example, is there any evidence to support the thought or thoughts? Any evidence to refute them? What would you tell a friend (who is in financial trouble) who had the same thoughts? What are the consequences of your overspending?
Swim counter to the culture
For all the inner stuff that causes overspending, there's no denying that America is all about consumerism. “A consumerist culture is woven into our DNA. We are essentially programmed to reach beyond our means, without fully understanding the value of credit. People take out credit cards and don't understand that money must be repaid,” says Jason Kolinsky, a certified financial planner with Kolinsky Wealth Management. “We live in a world where children are walking around with $600 iPhones and they grow up believing they need expensive sunglasses or jeans to fit it. There are people spending money that they don't have, and they don't even realize they don't have it,” he says.
Break the cycle
McNeill asks clients to make a list of five things that deliver the same feelings they get when spending, such as joy and love, that cost nothing or close to nothing. It could be something like time in the park, at the beach, in the woods, time with family or friends, or a good book from the library. She asks them to indulge in those five things often, and better still if they journal about their experience and meditate. “We talk about self-observation and the ability to go within yourself and become the observer of your behavior,” says McNeill.
Then she gets them to start saving money. McNeill begins with small amounts, even as little as $5 a paycheck, something they will always be able to manage. “The idea is they have never been savers, so we start small so they have zero chance of failure. They open a simple savings account.”
They replace their shopping time with the five, free or low-cost things that give them a similar charge. “I ask them only to buy things they can return and to wait 24 hours before they use it. If they are still willing to do what it takes to pay for the item, after 24 hours they can keep it. If not, they return it. After a few weeks and months I have found they get so excited about the changes, they keep moving forward.”
What's key though, is the person must want to change. “If they tell me they are the victim of circumstance and go through a laundry list of why the world is stacked against them, I send them to someone who works with people on their fundamental beliefs,” says McNeill.
Some come back to work with her on money after they shift their beliefs, and some stay stuck and she never seems them again. Says McNeill, “The bottom line is if the person doesn't believe they have choices, then I can't help them.”
Rego says that if you find that shopping is your chief method of relieving stress, seek relaxation elsewhere, such as breathing exercises. “If you find that you overspend when you are angry or anxious, find a new way to deal with that emotion. You may be able to discharge it, without 'charging' it.”
Make it difficult to overspend. “It's hard to overspend if you don't have money or credit cards available. If necessary, restrict access to them until the behavior is brought under better control. Lock away credit cards or speak to your bank about putting a limit on them. Carry only the minimum amount of cash you need each day. Turn off '1-click' purchasing on websites (or block access to them – or the Internet, temporarily),” says Rego. Everything you can do to make it harder to overspend, can make it more likely you'll succeed, he says.
Don't go it alone
Kolinksy says one way to help break the cycle is to find a financial role model. “We all know people who are great with money, whether it's your co-worker who always packs a lunch or your coupon-clipping aunt. Take notice of the little things your financial role model does and try to emulate them yourself.”
You need an accountability partner, be it a friend, family member or a professional like a financial advisor.
What's important though, is just like the alcoholic has to admit they can't handle booze, come clean. The first step in getting better is realizing there's a problem.