Around 50% of Americans have less than $250 remaining at the end of each month, after covering their expenses, according to a 2021 survey conducted by The Balance. 12% of Americans have no money left by the end of the month.

Overspending occurs when you spend beyond your means. In some cases, this can be anomalous behavior, because of a job loss, or running into unexpected costs, such as a medical bill. However, with over 25% of Americans failing to repay at least one bill each month, it is helpful to understand why we overspend and how we can wean ourselves off of it.

Why Do We Overspend?

There are many reasons behind overspending.

Problem: Failing To Plan. One key reason is failing to plan ahead. Spenders without a budget are less in tune with how much they are able to spend while accounting for their bills and living costs. This means that impulse buys are more common, hiking up your outgoings, but with your income remaining the same.

Solution: Budget! This is a really simple but effective method to help curb overspending. Nowadays, you’re spoilt for choice of apps and businesses trying to help you. With free budgeting apps available to download to your smartphone, you can categorize and track your spending, spotting where you need to cut down. You can also set reminders for yourself to pay bills, and on some more high-tech apps, create direct debits into a saving account. Try free apps like Mint and Honeydue to see how you can change.

If apps aren’t quite for you, you could create a manual spreadsheet. Document how much money you’re earning, and how much you are spending. Label what you are spending on, and then assess where you could be saving.

Problem: High Cost Borrowing: Many Americans turn to loans to help them cover their costs. Over 191 million Americans use credit cards, which are interest-free if paid on time, but start to add up when not repaid, with current US debt for credit cards at $910 billion as of December 2021.

There are also 12 million Americans that use payday loans on a yearly basis, often carrying interest rates of 300% to 500% APR – and whilst these are effective for short term cash flow problems, the costs of these skyrocket if individuals struggle to repay them and have a negative impact to your credit score too.

Solution: Borrow Sensibly. When borrowing, you should consider all of your options and choose the one most suited to your current situation. If you need a line of credit with no-to-low interest, consider taking out a new credit card. Many offer 0% interest introductory schemes, such as the Citi Simplicity Card.

Problem: High Cost Energy. 20% of Americans couldn’t pay their energy bills in 2021. With rising inflation taking its toll on the cost of energy, bills are surging, and with that spending rises.

Solution: Be Mindful Of Usage. It may sound intuitive, but there are many ways to reduce energy usage. For example, turning off your laptop or desktop at night can reduce how often you need to charge it. Cumulatively, this could save you tens of dollars per year – per device! You should also avoid switching on a half-full dishwasher, and using energy inefficient light bulbs. LEDs are the most efficient, and can save you hundreds of dollars in energy (and replacing bulbs!) each year.