Blowing the Bank: How to Recover From a Spending Hangover
We know how this story goes: You had a weekend where your credit card did some heavy lifting, you were running to the ATM for a little extra cash, and you were having the time of your life. You may have spent a little more than expected when you went out of town for a friend's wedding. Or maybe you were on an amazing vacation and you didn't want to pass up doing everything you could to enjoy the trip, even though it meant going over your budget. It all seemed like innocent fun at the time!
But now the excitement has worn off and now you’re left recovering from your spending hangover. We’ve all been there. Truthfully, I’ve probably been there too many times.
Just because the damage has been done, doesn’t mean there is nothing you can do about it. Follow these tips to help you nurse your way back to financial health.
1. Assess the damage.
As much as you may want to hide from your overspending, you’ve got to step up and get a clear picture of exactly what you’ve spent. When I know I’ve spent too much, I hate logging into my credit card and bank accounts, but I know that I can’t fix the problem if I’m not exactly sure what that problem is.
To add it all up, I like to go old school and write it all down in a notebook. I go through my accounts, list out all of the places I’ve just completely overspent and add up to the total. Most recently, I overspent on a big vacation. At the time I had a pretty good idea that I was going over my budget, but once I got home and actually added it all up, I realized that I needed to put a real plan in place if I was going to undo this spending mistake.
2. Create a realistic plan to repair the damage.
You’ve done the damage, now it’s time to actually fix it. If you have a savings account, it can be easy to just use your savings to pay off your mistake, but that doesn’t leave you in a good place. It may be wise to use your savings to pay off a hefty credit card bill, but you still have to have a plan in place to pay back your suffering savings account.
Let’s say you’ve blown your budget on vacation and are suffering from a $1,600 spending hangover. You know your monthly budget and you usually let yourself have around $800 a month for fun spending money each month. You could plan to not spend any money for the next two months and put the $800 of spending money each month toward paying off your spending hangover. But that’s not really a realistic plan.
A more realistic plan would be to cut your monthly spending budget in half and plan to put away $400 for the next four months to make up for your overspending. Or, even better, you could set a goal to not only spend less, but to make more. If you could cut your spending by $400 and plan to make an extra $400 a month, you will have paid off your overspending in two months!
Whatever plan you decide on for recovering from this spending hangover, write it down, be specific with the timeline, and keep it in a place that you can see easily. Use that plan and timeline to keep you honest and on track.
3. Boost your short-term income.
Now that you have your repayment plan laid out and you need to bring in some additional income over the next few months to help pay off what you’ve spent, it’s time to find the right short term jobs to make a little extra cash.
Before you stop reading and say you don’t have time to make any extra cash, let’s break this down a little! In our example we want to boost your income by $400 month, which is $100 per week. Considering the going rate for a dog sitter is around $25/day or a babysitter is $20/hour, earning an extra $100 a week feels a little bit more do-able. So if your repayment plan includes earning more, break it down into a per week amount and get to work!
Aside from dog sitting and babysitting, there are other side jobs you can pick up to boost your short-term income quickly. Some things you might want to consider: selling unwanted items on eBay, signing up for marketing focus groups, providing on demand services (like through Task Rabbit or Uber), or selling any creative services or skills that you have.
4. Slash your short-term expenses.
You know that you want to cut your spending by a certain amount for the next few months (in our example we’re cutting spending by $400 for the next two months), but it can be really hard to cut spending because it often feels like a punishment.
Don’t let that negative thinking stop you! In this situation, think of it as a challenge to find fun, free (or low cost) activities to fill the coming weeks. Instead of heading out for dinner with friends, invite them over for a fun night in. Or trade the boozy weekend brunch for an afternoon picnic in the park.
Make sure to take the money you’re saving and either pay off your credit card bill or use it to build your savings account back up. I like to transfer the money that I’m saving on a weekly basis to be sure I’m not tempted to spend it just when the next exciting thing comes my way.
5. Find the root cause of spending.
It can be easy to rationalize a spending mistake by saying it happened once, you’ve learned from it, and it won’t happen again. But that’s not necessarily the truth. When you’ve overspent and landed yourself in this position, it’s not always because you’ve had an unexpected cost pop up or because you’ve made one bad spending choice. It could be because you haven’t given yourself enough spending money each month, or because you’re living a lifestyle that is larger than what you can actually afford.
Try to get to the root cause of why you’ve overspent and what needs to happen in order to not have it happen again. Take a look at how often this happens and see if you can understand any common themes for why or when your overspending happens. Once you find a common theme, or a recurring reason for why you overspend, brainstorm what you can do about it to make sure this isn’t a cycle that plagues you.