Buzz
To help protect your finances from budget disasters, we're revealing eight common overspending traps—along with practical tips to help you hit the brakes before it's too late.
This article was originally published on LearnVest.
You Thought You Found a "Bargain"
Snagging that perfect pair of jeans at a huge discount might feel like one of life’s greatest victories. Actually, scratch that—it’s when you finally use the $5 reward coupon you’ve been saving up at the drugstore.
Alright, it’s exciting to grab a deal, no matter what it is.
However, Reef Karim, D.O., a psychiatrist and director at a California addiction treatment center, warns against getting lost in the obsession with deals. "For some people, when they think they’re scoring a bargain, it triggers a euphoric feeling, which makes them more inclined to keep spending," says Karim.
Retailers are well aware of this psychological response and leverage it to hook customers. As reported by Fox Business, stores often create the illusion of constant sales to appeal to bargain hunters. Some even hike prices just to offer them as discounts later.
How to Resist the Urge to Overspend: Shoppers can—and should—take advantage of genuine bargains that save money. Just remember this rule: "A deal isn’t truly a deal if you’re putting it on a credit card," warns consumer expert Regina Novickis. "Interest charges quickly erase any savings."
Also, be sure to critically evaluate any sale before jumping in—especially if you're frequently on deal sites like Groupon or LivingSocial, which can encourage more spending.
So, ask yourself: Is the deal really worth it if it’s for something you don’t actually need? Sure, scoring a $300 designer lamp at 50% off sounds like a great deal—but only if you were already looking for one and had the budget for it. Otherwise, you’ve just spent $150 for no real reason.
You’re Excited About a New Home Purchase
The irresistible urge to transform your new space—also known as new home syndrome—can turn even the most disciplined into a spender. Expenses like window treatments, high-end appliances, and "must-have" furniture can quickly accumulate.
Need some evidence? A 2013 survey conducted by American Express and Echo Research revealed that nearly three-quarters of homeowners intended to spend about $4,000 to renovate their homes, with over $300 earmarked for accessories.
However, it’s important to distinguish between essential purchases and impulse buys. Do you really need that flat-screen TV, or is it just because you’re in a new home?
How to Resist the Urge to Overspend: Before you start packing, determine the essentials for your new place—then create a realistic budget for purchasing them. "The key is recognizing that you can’t do everything at once, so allocate funds for immediate necessities and leave the rest for later," advises Laura Scharr-Bykowsky, a Certified Financial Planner™ from Columbia, S.C.
You Hit the Jackpot
Receiving unexpected cash—whether it’s a tax refund, a work bonus, or an inheritance—can be a great way for responsible savers to boost their savings. However, it can also ignite our spending impulses.
According to Novickis, this happens because windfalls often feel separate from our usual budget.
It’s called mental accounting," she explains, "which means we treat 'found' money with less caution than our regular earnings.
Take lottery winners who end up broke, for example.
How to Resist the Urge to Overspend "Without a clear plan for the windfall, the money can start to feel like it’s burning a hole in people’s pockets," says Scharr-Bykowsky, who recently met clients who bought two new cars, a Caribbean vacation, and more—all within their first month of receiving an inheritance.
What’s a smarter strategy? Make a plan for your cash before you start spending it.
If you don’t have six months’ worth of emergency savings yet, Scharr-Bykowsky recommends making that your first priority. Once that’s covered, use a portion of the money for retirement savings.
Then, it’s totally okay to splurge a little. "Just don’t blow the whole sum—and make sure you’re still working toward your long-term financial goals," advises Novickis. A solid guideline: Spend up to 10% on fun, and allocate the rest toward your big-picture financial objectives.
You’re On the Job Hunt
You’ve probably already heard that dressing appropriately for an interview is crucial, but here’s some research to back it up: A 2011 study found that it takes just a quarter of a second for someone to assess your competence and trustworthiness, and it all comes down to your appearance.
Here’s the catch: A polished, professional look doesn’t come cheap. Men can expect to pay anywhere from $300 to $599 for a basic suit, while women can shell out about $300 for an appropriate interview outfit.
And that’s not the only expense job-seekers might consider—many eager applicants spring for things like a premium LinkedIn membership, which lets users see who’s been checking out their profiles. The cost? As much as $119.95 per month!
How to Resist the Urge to Overspend: If you can manage it within your budget, investing in one high-quality piece, like a standout interview suit, can be worth the expense—as long as you care for it and make it last.
One thing to remember: "Sometimes job-search-related expenses can be tax-deductible," says Scharr-Bykowsky, so be sure to consult your accountant—and keep all receipts if you plan on itemizing your deductions.
You’re Keeping Up With the Joneses
We all know them: the high-spending friends who seem to have no problem tossing money around. And since no one wants to feel like the tightwad in the group, hanging out with these types often leads to a financial hangover the next day.
Our identities are often shaped by our spending behavior, especially when we're in public," says Karim. "So when we’re out with friends and want to make an impression or fit in, our purchasing choices can define who we are.
How to Resist the Urge to Overspend: If you can, try to find ways to spend time with your friends without breaking the bank—like grabbing coffee together or going for a hike.
If you’ve committed to a social event where going out is unavoidable, Scharr-Bykowsky recommends teaming up with someone else who’s also trying to control their spending urges.
Find a friend to be your savings partner, just like people who pair up for accountability when they’re trying to lose weight," she advises. "Having a friend who balances out the high-spenders will help." With a buddy by your side, you might be able to persuade the group to kick off the evening at a more affordable spot.
And according to research from Vanderbilt University and Texas A&M University, there’s another benefit: Friends who fight the urge to overspend together often feel more connected to each other.
You’re Relaxing on Vacation
Excursions, spa treatments, and $20 bottles of sunscreen from the resort gift shop are often part of a soothing getaway—but they also add up.
A 2013 study by American Express revealed that the average American spends about $1,145 on summer travel alone. Scharr-Bykowsky notes that a significant portion of this spending is often due to inadequate planning.
"The issue many people face is that they’ll budget for only the airfare and hotel, but they forget about the additional expenses, leading them to overspend," she explains.
How to Resist the Urge to Overspend: Planning your vacation budget involves making compromises, according to Scharr-Bykowsky. If you're opting for a luxurious hotel, consider cutting back on the number of fine dining experiences you enjoy.
To keep those tempting vacation "extras" under control, start planning activities well in advance of your trip. By doing research and booking excursions ahead of time, you’ll avoid the temptation to spend impulsively on costly last-minute adventures.
And Novickis has an additional tip:
It's a smart move to reach out to the hotel concierge beforehand to inquire if they can recommend any local providers and what their pricing might be. At the very least, you'll have a clear idea of costs in advance.
You're Celebrating a Special Event
From weddings and baby showers to job promotions and birthdays, there are countless reasons to splurge for a celebration. However, whether you're treating someone else or indulging yourself, the reality is that these celebratory expenses add up quickly.
Karim points out that a number of factors contribute to why we tend to overspend when celebrating loved ones. "Feelings of affection and closeness often take precedence over the practical need to keep spending in check," he says. In other words, emotions often outweigh practicality.
Another reason for this behavior can be linked to our relationship with money. Karim explains that many people use money as a way to impress or form an emotional bond with others. At times, spending becomes a means of demonstrating how much we care for someone.
How to Avoid the Overspending Trap: If you know a special occasion, like a birthday or anniversary, is coming up, try setting aside money ahead of time so you're not hit with a financial burden when the day arrives. Even saving just $20 a week can add up to hundreds over a few months of planning.
However, if you're caught off guard by a gift-giving occasion—or didn't manage to save enough—Scharr-Bykowsky suggests thinking creatively.
Rather than spending a lot of money on a bouquet of roses to go with that new necklace for your significant other, consider writing a heartfelt love letter. Not only will it cost you nothing, but your partner will likely appreciate the sentiment even more.
Another great idea? Offer your time—perhaps by volunteering to address wedding invitations for your best friend, assist with DIY favors for your cousin's baby shower, or prepare your father-in-law's favorite lunch to celebrate his retirement.
Sometimes, You Just Want to Treat Yourself
Whether it's to recover from a rough day or celebrate a great one, many of us resort to spending as a form of self-reward. "I deserve it!" we tell ourselves as we clock out and head to the manicurist or our favorite dining spot.
The issue with this mindset, according to Karim, is that it ties your emotions directly to your spending habits, which can quickly become a dangerous cycle.
When you're feeling down, you may engage in behaviors that try to make up for those negative feelings," Karim explains. "For some, that means spending money and buying things.
How to Avoid the Overspending Trap: Occasional indulgences are fine—as long as they align with your budget.
But if these splurges are frequent or pushing you beyond your budget, Scharr-Bykowsky suggests finding non-financial rewards that can be just as fulfilling, like watching your favorite movie or treating yourself to a bowl of ice cream. The key takeaway is simple: You don’t have to spend money to show yourself some love.
Images courtesy of Andy Dean Photography (Shutterstock), Jeremy Levine, bpsusf, Gareth Williams, Kenny Louie, and Steven Depolo.
