Brett Anderson knows how dangerous it is to overspend. As a certified financial planner with St. Croix Advisors in Hudson, Wisconsin, he advises clients on how to save more of the money they earn. And yet, Anderson admits that he, too, is sometimes guilty of spending too much on coffee, shirts and gadgets that he doesn’t really need.
The problem? Overspending can feel good. And it can be hard to resist the immediate gratification that comes with spending money.
“Overspending? It’s easy,” Anderson said.
Typically, the big budget busters that face Americans are houses and cars. The National Association of Realtors reported that the median price of existing homes for sale in September was $245,100. That is an increase of 4.2% from the $235,200 median price in September of last year. In January of this year, the average price that Americans paid for a new car was $34,968, up 3.3% from the same month in 2016.
But there are many other smaller items on which Americans tend to overspend – daily buys that many of us think little about. Fortunately, there are strategies to control your spending, the most important being to create a household budget showing how much you spend each month, including smaller discretionary items like eating out and entertainment, as well as how much you bring in.
It also helps to understand what American consumers typically spend too much on. If you know what items tempt us to spend our dollars too freely, you’ll be better able to resist the temptation to blow your money on the little things.
The little things
Anderson said that most people think of cars and houses as the two buys on which Americans are most likely to overspend. But it’s the little purchases we overspend on every day that really add up.
“We nickel and dime ourselves in overspending each day,” he said. “It’s just daily life.”
Anderson pointed to the $6.50 coffee we buy on our way to work, the $20 lunches we eat to get a break from our cubicle or the $200 cable and Internet bill we gladly pay each month.
“My list could go on,” Anderson said.
And he’s right. There are plenty of small items we overspend on each day that aren’t really necessary. Consider that daily lunch – think of how much you could save if you brought your lunch from home. Or those morning coffees, too. You could save a significant amount of cash if you simply made your coffee at home before leaving for the day.
How about Fido or Princess?
Mike Catania, chief technology officer of online savings community PromotionCode.org, admits to having a spoiled dog, one that he spends plenty of money on.
And Catania’s not alone. The American Pet Products Association estimated that pet owners spent $62.75 billion on their pets in 2016.
Catania said that Americans looking to spend less should take a close look on the dollars they are dropping on Fido or Princess.
“Of course we love our pets, and we want to give them the best lives we possibly can,” Catania said. “But they are animals, so we need to be careful not to project our material wants onto them. Your cat doesn’t care about brand-name toys, and your dog doesn’t care that your neighbor’s dog has a newer collar. The value of your pet is the role that he or she plays in your family’s happiness, and you don’t need to spend recklessly on that.”
Toys and gadgets
Abby Eisenkraft, an accredited tax preparer and chartered retirement planning counselor with Manhattan’s Choice Tax Solutions, said that Americans still overspend on the latest electronic toys, everything from the newest-release smartphones to the highest-end computers and tablets, even when they say they don’t have enough money to contribute to a 401(k) plan or other retirement account.
“I often run into a brick wall with my clients, especially millennials, when I encourage them to reduce their taxable income by contributing to the 401(k) plan available to them at work,” Eisenkraft said. “Clients tell me they don’t have any money. But while I’m talking to them, they have the latest iPhone, iPad and every other new gadget under the sun.”
Food is another big dollar-drainer for Americans. The Bureau of Labor Statistics says that consumers spent an average of $7,203 on food in 2016. That comes out to an average of $4,049 for food prepared at home and $3,154 for food away from home, at places like restaurants and coffee shops.
That figure is up from the average of $5,978 that American consumers spent on food in 2015.
Michael Banks, founder of the Fortunate Investor blog, said that consumers often spend money at the grocery store for no reason at all. They often have enough ingredients at home to make meals for the week, but aren’t aware that they have everything they need in their cupboards.
“I know everyone needs groceries, but it’s easy to overspend on groceries when you might not even have to go to the store at all,” he said.
Banks recommends that consumers, before they head to the grocery store, go online to recipe sites to search for the ingredients they already have in their homes. They might be surprised to find how many meals they can make with food they already own.
According to a study by personal finance site Finder.com, almost one in five Americans admitted to regretting going into debt to take an expensive vacation.
This result is no surprise to Jennifer McDermott, consumer advocate for Finder.com.
“It’s so easy for our normal financial responsibility to go out the window when we start planning and booking our vacations,” she said. “It’s an opportunity to treat yourself, but it’s an easy overspending trap to fall into.”
To avoid remorse and to save money when vacationing, McDermott recommends that consumers shop around for everything from airfare and hotels to tickets and attractions. Consumers can also stick to public transportation instead of taxi or Uber rides to save money while vacationing.
“Doing thorough research will pay off in the long run,” McDermott said.
What are some things that you’re trying to curb overspending on? Let us know in the comments below!
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