Is Your Spending Out of Control? Three Ways to Fix It
Whether it’s ignorance of your true financial position, an addiction or simply retail therapy, there are things you can do to address your overspending.
![A young man holds his empty wallet above his head as he looks into it.](https://cdn.mos.cms.futurecdn.net/YQ9Hs4P9ddyXGBgLMstS2j-415-80.jpg)
I’ve been fascinated by “spending” recently, for some odd reason. I’ve seen its addictive qualities in many clients’ lives, friends’ lives and, sadly, even my family’s finances as well. It all seems to start the same — we buy a few items that seem harmless. Next thing you know, you are getting successive credit card bills and thinking, “Boy, this got out of hand quickly.”
The natural first question at hand is, why do we seem to spend more than we should? I’ve done a lot of reading, analyzing, self-reflecting and observing. I’ll distill it down into three main categories below. I’m curious which you most identify with.
Category #1: Ignorance
The first reason I find that people spend uncontrollably is simply ignorance. Now, I don’t necessarily mean these are ignorant people, but it’s ignorance in general. Perhaps one spouse is simply unaware of where the family finances stand. They seem to think everything is fine financially, and yet, things are getting out of control. It is easy to point fingers in this type of situation, but honestly, both spouses are culpable, because they’re not communicating.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The cure: To me, overspending is the easiest issue to “cure.” For starters, having an open dialogue on finances is critical in any relationship. It is important to be on the same page and don’t be afraid to discuss these things sensibly. In situations where you may need to bring in heavy artillery, I’d recommend consulting with your financial adviser. They can help lay out the immediate ramifications of out-of-control spending but also the long-term negative impact, such as having to work longer or not being able to pay for the kids’ college.
Category #2: Addiction
When we spend, it can release endorphins and dopamine, chemicals in our body that make us feel good. If something makes us feel good, the natural reaction is to do more of it. People who fall into this category usually start out spending on smaller items, then bigger and bigger purchases are needed to get that chemical reaction going. Think of a drug user who builds up a tolerance and needs a bigger quantity each time to receive the same release. It’s no different when it comes to addictive spending — it can spiral quickly and leave a family in financial ruin.
The cure: There are many ways to attempt to thwart addictive spending. One can seek help professionally or join a group much like AA. You can simply go cold turkey, like those who give up smoking on the spot. I’ve seen individuals journal or catalog their spending. In some instances, simply keeping to a strict budget can be very useful.
I’m a big fan of harnessing the addictive qualities for a positive result. For instance, instead of getting that dopamine hit by spending, try getting it by saving. Think of savings or investing as “spending” in a way. See how quickly you can build up that emergency fund, or your child’s 529 account, or perhaps your 401(k). Can you get the balance above $10,000, $100,000, $1 million?
In all seriousness, I’ve seen a lot of people become obsessed with savings milestones, and I would call that a good addiction.
Category #3: Filling a void
The final reason I have read or witnessed people spend is to fill a void in their lives or, similarly, to distract them from harsh realities. Some use spending to combat depression or loneliness. Others use it as a way to cope with difficult emotions, feelings or memories.
Spending is like any other vice that people turn to in difficult times to forget about life’s woes. Some choose drugs, alcohol, gambling or eating. Others prefer retail therapy.
The cure: Let me start by saying I am addressing those who admittedly have a problem with spending. If you spend responsibly to fill a void, I’m not so sure there is a major problem. If you are constantly spending at the peril of your own financial security, then there is certainly an issue that needs to be addressed.
The cure for this, of course, can be professional help to address these voids. For issues that aren’t as serious, you can try to fill this void with something constructive that provides a release and what you need in a more positive way — perhaps volunteering or exercising more. Maybe you can join an organization, group or team that you are passionate about.
We all need distractions in life, and I’d encourage this group of individuals to do some real soul-searching to discover what they are passionate about, other than spending, and use that time and money on developing healthier habits or activities.
Spending when done responsibly can certainly be an enjoyable thing. If you start to find yourself on a slippery slope, I find it best to stop in your tracks and address the cause right then. This way, you can tackle the problem before it becomes a real issue. Remember, we are here to help in any way we can.
As always, stay wealthy, healthy and happy.
Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC.
A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation.
Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses.
-
Eight Key Steps to Take When Investing in the Stock Market
The stock market can be a confusing place for beginners, but it doesn't have to be.
By Kiplinger Advisor Collective Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published