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

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Shoppers at a Black Friday sale at the King of Prussia Mall in King of Prussia, Pa. On November 26, 2021.

Rachel Wisniewski | Reuters

As the year draws to a close, many Americans might consider 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.

Perhaps the last few months of the year made it difficult to stay on a budget, especially one that hadn’t been updated for the new normal. Following the Covid-19 vaccinations and the easing of pandemic restrictions in the spring, many Americans felt good about shopping and going out again after a year and a half indoors.

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But at the same time, inflation has hit and forced consumers to raise the prices of goods and services such as restaurants and gasoline.

To combat this and keep your budget under control, here are some red flags that financial experts recommend watching for a spending problem, and what people can do about it.

You accumulate debts

An early sign that you might have a spending problem is that you are taking on debt, especially on high interest credit cards.

This is of particular concern if you suddenly find that you can’t make a full payment at the end of the month, need to reduce the amount you owe, or can’t even pay the minimum amount, according to Jacqueline Schadeck, a planner. certified financial. based in Atlanta.

Of course, it’s likely that credit card balances will increase after a year without spending too much to get out, said Susan Greenhalgh, a certified financial advisor who runs Mind Your Money in Providence, Rhode Island.

“We were kind of getting used to really low credit card statements every month, and now they’ve gone up dramatically,” she said.

Having a higher bill a month isn’t an immediate cause for concern, but it’s something to watch for future credit cycles and determine if you need to reset your budget, she said.

Your credit score suddenly drops

Another thing to watch out for that could indicate you’re spending beyond your means is a sudden drop in your credit score.

This is because one component of the score is your credit usage – that is, the amount you spent against your total limit. As you get into debt, your credit usage will increase and your credit score might drop to reflect that, Greenhalgh said.

“If all of a sudden you are now putting travel, clothing and restaurants on [your credit card] and you don’t think about it, don’t be surprised if your credit rating goes down, ”she said.

You let your emotions guide your spending

After a year of not doing a lot of the things we’d like to do, it can be tempting to let our emotions get the best of you and spend limitlessly. This can be particularly difficult in a context of uneven recovery, where the pandemic has been beneficial or neutral for some Americans but very damaging for others.

“You see some people have problems because of this because they use the spending as a way to just get accepted and keep up,” said Adam Blum, registered psychotherapist and founder of the Gay Therapy Center. He added that this has been particularly noticed as a problem among gay men.

“When we pass out and don’t think about what we are doing, it is more likely that we will make mistakes that we regret,” said Blum.

You’ve tried to budget or limit spending, but you’re having trouble

Of course, some things after the pandemic will cost more due to inflation and crowded supply chains.

If your expenses go up because of it, it may be unwanted, but it’s not necessarily a problem, said George Blount, financial therapist and managing partner of nBalance Financial in Cambridge, Massachusetts.

I always encourage people to be careful with their money.

Susan greenhalgh

accredited financial advisor at Mind Your Money LLC

On the flip side, if your spending has gotten out of hand, it’s a red flag, he said. And, if you’ve tried budgeting using a system or product that just isn’t working for you, that’s also a cause for concern.

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

Additionally, if you’re making a lot of money but just don’t know where it’s going, it could signal overspending, according to Schadeck.

The solution? Conscious spending

To solve a spending problem, financial experts recommend that you become familiar with the details of where your money is going and the emotions behind the purchases.

“I always encourage people to be careful with their money,” Greenhalgh said.

That means watching their spending for a few months in a row, she added.

Set aside some quiet time with your bank account and credit card statements and really see where the money is going, she said. Then assess what you feel good about and what you are not so happy about. This could include comparing expenses to a pre-pandemic budget, identifying any changes in expenses, and correcting the course if necessary.

Being connected to where you spend can help you form new habits, Greenhalgh said.

If you’re still having trouble spending, or think it could be related to emotions you’re having trouble controlling, seeking help from a therapist or financial therapist can help you with these issues.

You can also do certain exercises such as checking your emotions before making a purchase, Blum said.

“Everything we do has an emotional component, and if we don’t know what it is, we’re sort of operating at a loss, we’re stuck,” he said. By asking yourself why you are making a purchase before you swipe your credit card, you can become more aware of and address the emotional component.

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