How to Stop Overspending and Manage Your Personal Budget

Taking control of your spending doesn't have to be complicated or require special skills. Think of it like taking medicine—when you use cough syrup, you don't just guess how much to pour. Instead, you use the exact amount in the provided measuring spoon. The same should apply to your money: you should only spend what fits within your "budgeting container," ensuring you're not overspending.

Signs You're Overspending

Before making any changes, it's important to recognize if you're overspending. Here are some key signs to watch for:

Saving less than 5% of your income
Not reducing your credit card debt
No emergency savings
Never having made a budget
Paying fees for going over your credit limit

Even if you don't have severe overspending issues, controlling your expenses helps you save more and manage your money according to your values.

How to Manage Your Expenses

One simple way to manage your budget is to divide your expenses into categories. Here's how:

Set up two bank accounts: one for living expenses and necessities, and another for fun or entertainment.
Transfer a fixed amount of money into each account regularly.
Use each account only for its intended purpose.

This method ensures you limit your spending on entertainment, without needing to track every single purchase. By dividing your funds, you'll naturally keep better control of your money.

To keep things in check, you can review your account balances weekly. Before spending on fun activities—like going out to eat or seeing a movie—check your entertainment account to make sure you have enough available.

How to Balance Your Budget

1. Build an Emergency Fund

An emergency fund is essential for covering unexpected expenses or delayed income. Ideally, it should cover at least one month's worth of living expenses.

A quick (though not always enjoyable) way to build this fund is to cut out entertainment spending for a few months temporarily. If this feels too extreme, try contributing small amounts regularly to both your living and entertainment accounts.

2. Avoid Spending Triggers

If you're prone to overspending when out with friends, take steps to avoid temptation. Leave the card connected to your main account at home and only bring the amount of cash you're willing to spend. This prevents spur-of-the-moment decisions, like picking up the tab for everyone.

You can still use mobile payment apps if you need to, but limiting access to funds can help you avoid unnecessary spending and stick to your budget.

3. Recognize the Desire for More

It's common to always want something bigger or better. Imagine someone who grew up dreaming of owning a home. After years of hard work, they finally buy their house and are thrilled—until they see friends moving into larger homes, and suddenly, their house doesn't feel as special.

This cycle of always wanting more is called hedonic adaptation. It means that no matter how much you achieve or acquire, your happiness levels eventually return to their baseline, leading you to crave the next big thing.

There's nothing wrong with setting big goals, but constantly chasing more can be harmful if it leaves you dissatisfied with what you already have.

Alternatives to Hedonism

A more sustainable approach to happiness is eudaemonism, which focuses on personal growth and fulfillment rather than external achievements. It has six key elements:

Self-awareness
Developing your skills
Living with purpose
Working toward meaningful results
Deep engagement in activities
Finding joy through self-expression

By focusing on these aspects, you can cultivate lasting satisfaction that isn't tied to material success. There are two practical ways to combat hedonic adaptation:

Pause unnecessary spending. Try going 30 days, several months, or even a year without buying things you don't really need.
Create a wish list. When you feel the urge to buy something, add it to a list and wait—whether it's 24 hours, a week, or several months—before making the purchase. This helps you practice delayed gratification and spend more mindfully.