How to Quit Hemorrhaging Money
Hemorrhaging money, bleeding money, wiping out your bank account. Whatever you want to call it, you’ve realized that you’ve been overspending…a lot. Now, what can you do about it?
Hemorrhaging money happens for a variety of reasons
Pressure from friends and family
Unfortunately, sometimes it’s the people we love the most that can pressure us into making unhealthy financial decisions. Have you ever been pressured into a fancy – three dollar sign restaurant on Yelp – dinner to celebrate a friend’s birthday? You know it’s not the type of place you can really afford, but you want to be a good friend. You decide to go, but stick with ordering only water and a side salad. Yet, your bill comes to $75 because your group decides to split the meal evenly. Then, next week it’s another friend’s birthday dinner. The week after that is a celebratory dinner for a colleague’s promotion…
Maybe your friends aren’t foodies, but perhaps you’ve been pressured into taking a trip with your family. Everyone decides that a great big reunion in Jamaica is exactly what the family needs this year. And although a weeklong vacation in Jamaica is something you’d love to do, you know it will deplete your checking account and eat into your savings – but, can you really say no?
A Credit Karma study found that “39% of millennials overspent in order to keep up with their friends”. What’s worse is that ⅔ of those individuals felt ‘buyer’s remorse’ after overspending on whatever it was that they felt pressured to buy.
Sure, it’s easy to point fingers at a young generation and say they simply don’t have the discipline or experience to responsibly handle their money. But you’d be wrong. In 2019, the average American adult overspent by $7,400. Yikes.
Little expenses add up quickly
Another reason why people start hemorrhaging money is through lots of little expenses. Small expenses add up quickly and quietly. Who doesn’t throw a few of the extra dollar items in their cart every time they walk through Target? Oh, and might as well get a $7 coffee from the in-store Starbucks to keep up your energy while shopping. And then there are the cute little knick-knacks displayed in front of the register that are all too easy to grab while you’re waiting in line to check out. So you finally exit the store and realize that you spent more than double what you had intended to. That, my friends, is what is affectionately called ‘The Target Effect’.
However, Target is certainly not the only store that designs its layout to incentivize customers to buy more, they just happen to be really good at it.
Overspending leads to more overspending
Lastly, overspending tends to lead to more overspending. Think back to the aforementioned family reunion in Jamaica. You may have already blown your budget with the airline tickets and hotel, but you decide that if you’re going to overspend, might as well spring for the all-inclusive package. But then you realize that all-inclusive package doesn’t include alcohol. At that point, what’s another few hundred dollars to upgrade your package? That “what’s a little more” mentality is dangerous. It’s a mentality that makes you feel like spending $500 more than what you should have isn’t really any worse than having spent only $50 more. But we all know it is definitely worse.
How to stop hemorrhaging money
Budget
Create a budget and stick to it. If you don’t have a budget or don’t think you need one, consider this – how can you manage something that isn’t being measured? Will you be able to tell whether or not you’re overspending if you don’t know what you should be spending? Probably not. With a budget, you’ll know exactly what you need to spend and any overspending will be obvious. There are also plenty of apps that allow you to set up notifications so you’re alerted when you’re close to and/or go over a spending limit.
Use Cash
Sometimes it makes sense to utilize cash. Consider bringing only cash with you in tempting environments. Have you ever dreaded looking at your credit card statement after a big night out at the bar? Or maybe you’re looking forward to purchasing a collector’s item at an upcoming auction. Using cash will stop you from spending any more money than you intended to.
Automate your savings
Automate your savings and retirement investments to ensure your financial health doesn’t suffer as an afterthought. Not only will this help you keep yourself on track toward your financial goals, but it will also limit you from spending money in the present that should be allocated to your future.
Pay attention to spending triggers
Take stock what’s happening around you when you have the urge to spend money you shouldn’t. We often respond to certain triggers, whether internal or external, that cause us to want to spend money. Quickly ask yourself a few questions:
- Are you in a bad mood?
- Did you just get paid?
- Were you talking with a friend who just purchased something new?
- Did you just see an ad on Instagram?
Determining if you have any particular spending triggers can help you stop any bad spending habits before they happen.
Plan out your rewards
Plan out rewards for yourself. Whether it’s a trip, new clothing, or investing in your education, plan for and track your progress towards the things you truly want to spend your money on. That will help keep your focus on the things that really matter. It will serve as extra motivation to keep you working towards your goals, help you maintain a positive attitude about money management, and deter you from spending money on things you don’t really care about.
Tell your friends and family
There’s an unfortunate faux pas association with talking about money. But your financial goals don’t need to be a secret. Especially if one of your goals is to quit hemorrhaging money. Confiding this in your trusted family and friends can be a great benefit. Having their support and understanding can help ease any feelings of peer pressure as well as serve as an extra layer of reinforcement and motivation to help you keep up your healthy financial habits.
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