Confession time: I have an inner rebel girl when it comes to money. She is pretty calm- most of the time. But sometimes she gets mad at the practicality of money and just wants to SPEND! And spend…and spend…and spend…and then spend some more. She is the overspending queen!
Years ago, my inner rebel girl and I didn’t get along. She was bossy and insisted on spending money all the time. The result? A whole lot of credit card debt.
After I pulled myself out of debt I had to figure out a way to live in harmony with the rebel girl. She had needs but so did I- it wasn’t about shutting her out altogether, but instead figuring out ways to keep her (and my spending) in check.
Here are my favorite ways to stop overspending:
Make a budget
I know budgets get a baaaaaaaad rap but budgets are THE key to cash flow management in your business. A budget will help you manage your small spending habits and serve as a support document when your overspending spirals out of control.
Think of a budget as a spending map rather than spending jail. Often, we think of budgets as constricting documents that are ruining our lives with rules and limits. But, when we shift our mindset around budgets and think of them as a tool to reach our goals, we stop resisting them.
A budget doesn’t need to suck! If your budget is based on actual data and realistic numbers, it will feel more like a reflection of your spending than a constraint. You’ll be more likely to stick to it and WANT to refer to it when the overspending rebel girl gets restless.
Learn the complete process for making a business budget here.
Add a Fun Money line to Your Budget
While we’re on the topic of budgets, give yourself unrestricted money to work with. I call this the fun money line of your budget because usually when we’re overspending, it’s because we want to buy something fun!
Fun money is money you intentionally put aside to spend on whatever you want. It’s unattached, unplanned money. It doesn’t need to be a lot- it can be as little as $20 month or it can be more.
Fun money takes the pressure off to know every single thing you’re going to spend money on. It’s a built in buffer for that part of yourself that gets fed up with all those practical expenses and just want to enjoy money.
Use your bookkeeping program to monitor cash flow
Bookkeeping programs are for more than tracking income and expenses for tax time! Your bookkeeping program can also help you monitor cash flow and make strategic decisions about your spending.
Most bookkeeping programs allow you to enter expenses manually- before they happen. This means you can “test” an expense to see if you can really afford it and how it will affect your overall finances.
Friends, this is HUGE! You can pretend to buy something and see the direct impact on your finances without actually having to spend any money! Sure, you can do the same math in your head, but there’s something about seeing the expense in relation to your complete financial picture that makes it feel very very real.
This practice has drastically reduced my overspending. Because even my rebel girl can’t deny concrete evidence that no, you cannot afford that right now.
Also, most bookkeeping programs have a memorized transaction feature, which means you can setup recurring transaction to automatically enter before they happen. That way, you have a complete overview of everything that is going out BEFORE you make the decision to buy something.
Crunch the numbers before you buy
Anytime you’re going to buy something that isn’t in your budget because you have some extra profits that month or received an unexpected check- do the math before you buy!
Look at how much the thing is going to cost you then ask yourself key questions:
- Do I have enough money to buy it?
- What happens to my bank account balance when I buy it?
- Is there any more money coming in (or am I spending the very last bit of money)?
- What payments are coming up?
Look at your finances holistically before you buy something and then do the math. Real math- not, “Well, it’s about this much.” Take real time numbers and assess if you can afford it.
The side effect of thinking critically about your spending is that you stop worrying if you’ve made the right decision or not. Taking the time to think through the financial implications of buying something, means you make the decision with intentionality and intentionality leads to confidence about your purchase.
Have a plan for how you will pay off your purchase
Sometimes we need to invest in our business and don’t have the cash flow to do it- this is when we turn to credit cards. While you should strive to pay for your business expenses with money you actually have, real talk- sometimes you need to buy something right away (like a new computer) and turn to your credit card for help.
If you are putting large expenses on your credit card, have a plan for how you will pay them off. Don’t just spend the money and figure, “I’ll pay it off somehow”– make a plan before your buy. A payoff plan includes real numbers and time frame like, “I will make an extra $300 payment for the next 4 months.”
After you make your plan, take action on it! Don’t let that plan sit on paper. Be accountable to what you said you were going to do.
My favorite trick to keep myself accountable is to schedule the payment(s) RIGHT AFTER I buy something. If I agree I will make an extra $300 payment a month, I set up a recurring $300 payment every month. This way, you don’t get distracted by the next thing you want to buy and start overspending.
What’s your favorite trick to stop overspending in your business?