Are You Spending Too Much? Ask Yourself These 3 Questions to Find Out

by Maurie Backman | Updated July 25, 2021 - First published on May 8, 2021

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Here's how to know when to cut back on spending.

YOLO -- it's not just a catchphrase; it can also be a spending philosophy. It's easy to believe that in exchange for working hard, we deserve life's luxuries, even if that means spending the bulk of our paychecks -- or even our entire paychecks.

So how can you tell if you're going overboard on spending or just enjoying life? Ask yourself these questions to find out.

1. Can I add to my savings most months?

You need savings for a lot of reasons, including for emergencies. But if you're not able to put any money into your savings account most months, you may need to limit your spending.

2. Am I covering my expenses or landing in debt?

It's not all that unusual to rack up some debt once in a while. For example, if your car all of a sudden refuses to start, you may not have the $800 needed for the repairs. Similarly, if a major home appliance breaks, you can't just sit back and save up to replace it -- you need a new one right away, which may involve swiping your credit card and paying off the balance over time. But if you often land in debt and end most months in the red (having spent more than your paycheck), then it's a sign to cut back.

3. Have I delayed financial goals?

Maybe you'd hoped to buy a home by now, or to pay off your car loan. But month after month, you don't seem to be much closer to making that a reality. If you've had to push back goals like these, you may need to rethink your spending.

How to get better at spending less

A lot of us overspend, but a few simple tricks could help you rein in your bad habits. First, set up a budget. That way, you'll be able to see what your various bills entail and you'll be better able to divvy up your money to cover essentials.

Next, set priorities. It's unnatural to deprive yourself of all the things you enjoy, but it's important to keep in mind your overall financial health. So figure out which nonessential expenses are most important to you and carve out room in your budget for them.

Finally, set up an automatic transfer from your checking account to your savings account. That way, some money from each paycheck will land in your savings immediately and you won't be tempted to spend it.

Overspending can really hurt your finances over time. If you find that you are prone to spending more than you should, assess your habits so you know where the problem lies. Address it and strike a balance between enjoying life and keeping a solid savings account.

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