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November 8, 2007

5 Signs You’re Overspending

By Vanessa Cohen

When I got my first credit card, I forgot that overspending would result in debt, especially considering I didn’t have a job and a $1,000 limit (that I quickly hit).

After a few years of bad credit lessons and an appreciation for earning money, I learned how to better manage my finances, but most of my friends are still living in debt and have yet to save anything. They’re all overspending.

And it’s not as though they have assets, like a home or land, that their money is tied up in. They have good jobs, make good money, but are always counting down the days until they get their next paycheck.

If this sounds anything like you, then you, like them, probably wonder, where the hell did all my money go?, about once a week. Well, you’re probably overspending, and if you’re not sure whether or not you are, read on.

Overspending sign #1
You’re broke before your next paycheck

About five days before you get paid, you start getting itchy for the money and begin counting down the days until you get that cash in your hand.

And when you do, you pay off small debts and then spend the next couple of days living like a millionaire . That is, until it’s all gone and you find yourself in the same vicious cycle.

Solution: Dedicate the next month to tracking your expenses. What do you spend your money on? You’ll begin to notice a trend: You tend to spend a whole lot on things you don’t really need. Once you figure out how much you could be keeping in your pocket, you won’t find the need to own 74 lip glosses just because you’re a sucker for packaging.

Overspending sign #2
You use credit cards to pay off credit cards
You have so many credit cards you can barely close your wallet, and if that weren’t bad enough, you also use one credit card to pay off debt on another.

Meanwhile, back at the ranch, you’re barely paying off the interest on each card, let alone the minimum payment required.

Solution: Use the next couple of months to pay down your credit card debt, starting with the one that collects the highest interest first. Once they’re all paid off (or at least a couple of them are), cancel all of them except one, and keep that one’s limit at something manageable, like $500.

Overspending sign #3
You’re always borrowing money

You used to be embarrassed to ask people to loan you cash, but now it’s almost like second nature. Come the beginning of the month, you have your hand out to your parents, your siblings and even your friends.

You convince yourself that this isn’t an issue of pride or integrity but rather, you’re in a bind and there’s nothing wrong with asking for help. And you’re right; or at least you were, that first time you asked. But once asking for money became a habit, you became a leech. You’re a smart, beautiful woman. Do you really want people to stop calling because of their underlying fear that you’re going to ask for some cash?

Solution: If you owe someone money, don’t avoid them. Acknowledge it and give them a deadline for payment. Seeing them constantly will give you that needed push to pay them back in full and get your pride back.

Overspending sign #4
You don’t save a cent

You haven’t saved any money in all the years you’ve been working and, what’s worse, you think you’re too young to start planning for your retirement.

Think about how much you make and what your necessary expenses are (rent, food, electricity). What are you left with? I’m pretty sure it’s not zero. And if you got fired tomorrow, how would you possibly be able to pay off your debts?

Solution: After you pay off all your debts, make it your mission to start putting at least $50 a month into a savings account or a 401k. After that, aim for double that, then double that, and so on and so forth.

Overspending sign #5
You lie about what you spend
Whether it’s your boyfriend, your gal pals or your parents, whenever anyone questions your spending habits, you defend yourself by lying about how much you really spend on certain things.

Solution: The fact that you need to lie should scare you because it indicates that you’re feeling guilty about your spending habits. And if you’re not, then don’t lie about them. But if you are, get your money matters in order and eliminate the need to lie completely.

Stop overspending

It’s tough to unlearn bad habits, but with some discipline and a positive outlook on the future, it is very possible to do so. Dedicate yourself to becoming an independent, financially sound woman and you’ll be happier for it.

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