I Lost $40,000: 6 Lessons I Learned from Overspending

Spending within your income is HARD...but overspending is easy.

I mean, think about how many marketing messages ambush you every day. Back in the 70s, it was reported that the average person saw between 500 to 1600 ads per day. Fast forward to 2021, and the average person is now estimated to encounter between 6,000 to 10,000 ads every single day. Whether we’re scrolling social media, listening to Spotify, or just walking around town, we’re being sold to constantly.

Plus, spending gives you an instant dopamine boost. Getting something new feels fun and exciting…and it’s really easy to do, whereas living within your financial means requires you to play defense and have a plan.

Today, I’m going to talk about five things I learned about overspending on my journey out of $40,000 of debt.

Where my Overspending Started...

My journey with overspending started out of an avoidance pattern with money.

I was not very conscious of how much money I had to spend or what I should be doing with my money, and so money came into my bank account and went right back out.

Also, I really was a sucker for a good deal. That's part of how I was raised. My mom and I would shop at garage sales and thrift stores.

As I got older, I got a job and began generating income, but I didn't have a real plan on how to spend  it. If something was on sale, not only was I buying it, I was buying two of it…just because it was on sale.

I kept spending more than I needed  to, and I ultimately ended up spending more money than I had, which led to $40,000 in debt.

I didn't realize that every time I overspent I was actually robbing myself of passive income that I could have been earning through my investments.

So, here's what I learned on my journey of overspending:

What I learned from overspending

1. More money isn’t (always) the answer to your financial problems

I used to think, Oh, I just need to make more money. But if you can't manage $1,000, then you can't manage $10,000 or $100,000 or $1,000,000.

Now, there are exceptions. Sometimes people are living below the poverty line are struggling to pay for their monthly necessities, and they need to consider alternative streams of income.

But a lot of people are not focusing on making the best use of the money they already have, and they think the only solution is earn more income.

2. You can’t avoid your finances

When I was stressed about a situation, I would tend to avoid it. I would avoid looking at my bank statements or my bills, because they made me feel anxious and overwhelmed and uncomfortable.

But when it comes to finances, avoiding a situation just makes it worse and it becomes this vicious cycle, wherein the longer we avoid it, the more disorganized and chaotic it becomes, the further we fall behind, and then the more overwhelming it is when we try to reengage...which just makes us want to avoid it all over again.

I was hiding from the reality of my situation, but that didn't make it any less real. It just made it impossible for me to do with anything about it.

Avoiding your finances is not a viable solution. If what you want financial security and freedom.

3. You need to make a plan for your money

If you don't have a plan for your money, trust me, someone else does. (Again -- 10,000 ads a day!)

If you don't know exactly what you want to do with your money -- how much of it that you want to be spending on your necessities, how much of it you want to be spending on just things you want, and how much you want to be putting away for future you -- then it's just going to disappear.

Need help making a plan? We recommend the 50/30/20 budget.

When we don't have a plan for our money, it's going end up in someone else's pocket.

4. Identify triggers to overspending

I had to take an honest look at how I spend money habitually and identify the triggers to overspending.

For me, there were some emotional triggers. Sometimes I go shopping to make myself feel better.

Then there are also environmental triggers, like I know if I go to Banana Republic when there's a sale, I'm going to walk out with less money than I had when I walked it.

When I identified my triggers, it was a lot easier to make a plan for what to do when the urge hits and avoid places and triggers that made me spend more than I wanted to.

In the most tempting moments, either avoid those situations or set up friction or boundaries that make it harder to break your budget when you're in those situations.

Here are my tips to avoid spending triggers:

If you tend to overspend emotionally (which is extremely common -- almost 50% of Americans – and two out of three millennials – tend to emotionally overspend) then identify what emotions trigger your urge to spend – stress, excitement, sadness – and make a plan for what to do when the urge hits. Maybe you call a friend, meditate, or go for a walk.

If you feel pressured into spending when you’re out with friends, then set a budget and leave your credit cards at home. If you only carry cash, you can only spend the amount that you have, so you don't need to rely on your willpower.

If going to certain stores or seeing certain websites, social media accounts, or promotional emails make you itch to spend money, then avoid those places and things as much as possible. Avoid visiting tempting stores and unsubscribe from social media accounts and email lists.

For instance, I have a friend who's tempted to go on a full shopping spree every time she goes to Target, so she figured out that if she places her Target orders online, and then just goes and picks them up curbside instead of wandering the aisles and spotting like all of this stuff that she didn't even know she wanted, she saves a lot of money.

5. Spend in alignment with your values

This is a life-changing concept.

Before, I was spending unconsciously. I was letting advertisers decide how my money was going to be spent instead of thoughtfully reflecting on my life, what's important to me, and the things that give me joy, and making sure that I was using money to enhance all of those.

So, what do you value in life? Is that your creativity? Is that your adventure? Is it a sense of freedom or security?

Figure that out and make a plan for how to spend money more intentionally.

How to spend money in ways that enhance your life.

The Most Important Thing I Learned

Once I became more intentional about my spending, I was able to live with greater peace of mind, start my own businesses, and grow my net worth from -$40,000 to more than a million.

The most important thing I learned when I STOPPED overspending is that self-discipline doesn’t have to be painful.

I have a friend who found out that she was allergic to dairy AND gluten. Because of that, she had to eliminate a lot of foods from her diet, but she felt so much better – she didn’t have digestive issues, her skin cleared up, and she had much more energy – that she didn’t mind. It wasn’t a sacrifice, because what giving up those foods afforded her was so much better than the temporary satisfaction she had when she ate them.

The same applies to cutting back on spending. The short-term sacrifice is nothing compared to the long-term payoff.

This often applies to cutting back on spending when you aren't clear on what you truly value. And you focus on your financial goals when you need to do to hit them and then spend the rest of your money in alignment with your values, it stops feeling like sacrifice.

We hear this over and over again from clients in the Million Dollar Year. When they clean up their spending habits, they realize they don't feel deprived and they're able to do things they thought were out of their reach before because they're now spending in a way that makes that possible.

That allows them to start investing sooner or start investing more and see that money grow and compound over time totally passively. It's worth the short-term decision for that long-term payoff.

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