Do you think you have a spending problem? How to spot one and fix it

As the year draws to a close, many Americans may be considering taking their personal finances seriously in 2022.

Some may even wonder if they have a spending problem and if so, what they can do to get back on track.

The last few months of the year can make it difficult to stick to a budget, especially one that hasn’t been updated to the new normal. After getting a Covid-19 vaccine and easing pandemic restrictions in the spring, many Americans are feeling satisfied about shopping and going out again after a year and a half at home.

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But at the same time, inflation has impacted and forced consumers to pay higher prices for goods and services like food and gas.

To combat this and keep your budget in check, here are a few financial experts who say you need to pay attention to spot spending problems, as well as what people can do to fix that problem.

You are piling up debt

An early sign that you may have a spending problem is that you’re in debt, especially on high-interest credit cards.

This is especially concerning if you suddenly find that you can’t pay in full at the end of the month, need to reduce the amount you owe, or can’t even pay the minimum amount, says Jacqueline Schadeck, a planner. Certified finance. based in Atlanta.

Of course, it’s likely that credit card balances will grow after a year of not spending much on outings, says Susan Greenhalgh, an accredited financial advisor who runs Mind Your Money in Providence, Rhode Island. .

“We’re used to having very low monthly credit card statements, and now they’ve increased dramatically,” she said.

She says having bills higher than a month isn’t cause for concern, but is something to watch over the next few credit cycles and see if you need to reset your budget. are not.

Your credit score suddenly dropped

Another thing to watch out for that could indicate you’re spending more than you can afford is a sudden drop in your credit score.

This is because one component of your score is your credit usage, which is how much you’ve spent compared to your total limit. When you carry debt, your credit utilization goes up, and your credit score may drop to reflect that, Greenhalgh says.

“If suddenly now you book travel, clothes and restaurants [your credit card] and you’re not thinking about it, don’t be surprised if your credit score drops,” she said.

You are letting your emotions guide your spending

After a year of not doing a lot of the things we want to do, it can be tempting to let our emotions take over and spend without limits. This can be especially difficult in the context of an uneven recovery, where the pandemic has been beneficial or neutral for some Americans but has taken a huge toll on others.

“You can see some people getting into trouble because they are using spending as a way to gain acceptance,” says Adam Blum, a licensed psychotherapist and founder of the Center for Gay Therapy. receive and keep up”. He added that this is particularly noticeable as an issue for gay men.

“When we’re unconscious and not thinking about what we’re doing, we’re more likely to make mistakes that we regret,” Blum says.

You’ve been trying to budget or limit your spending, but you’re having trouble

Of course, some things post-pandemic will cost more due to inflation and overburdened supply chains.

George Blount, a financial therapist and managing partner at nBalance Financial in Cambridge, Massachusetts, says:

On the other hand, if your spending becomes unmanageable, that’s a red flag, he says. And, if you’ve been trying to budget using a system or a product that doesn’t work for you, that’s also cause for concern.

“You have to use tools and you have to use them effectively,” Blount said.

Also, if you’re making a lot of money but aren’t sure where it’s going, that could signal overspending, according to Schadeck.

Solution? Mindful spending

To tackle spending, financial experts recommend getting familiar with the details of where your money is going and the emotions behind the purchase.

“I always encourage people to care about their money,” says Greenhalgh.

That means looking at their spending for several months in a row, she added.

Take some quiet time with your bank and credit card statements and really see where the money is going, she says. Then, rate what you are satisfied with and what you are not satisfied with about that. This may include comparing costs with pre-pandemic budgets, identifying any changes in spending, and adjusting the process as needed.

Being connected to where you’re spending can help you form new habits, says Greenhalgh.

If you’re still having trouble with your spending or feel it might be tied up by emotions you’re trying to control, seeking help from a therapist or financial therapist can help. overcome those problems.

You can also do some exercises like checking your emotions before making a purchase, Blum says.

“Everything we do has an emotional element, and if we don’t know what that is, we’re at a loss, we’re stuck,” he said. By asking yourself why you’re making a purchase before swiping your credit card, you can better understand the emotional component and address that.

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