What if I Overspend in One Category of My Budget?

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Unfortunately, overspending on your budget will happen, especially while you’re just getting started with your budget and figuring out the categories you need to implement.

If you overspend in one category of your budget, you will need to pull money from another category of your budget. This is just a temporary solution; when next payday comes, you will replenish all of these budget categories.

The idea behind moving money from one category to another is that you are budgeting every dollar and there isn’t money outside of these categories. If you overspend in a budget category, your only choice is to pull from another category since there is no money to make up for the mistake.

Overspending does not have to be your normal though. There are quite a few strategies that you could use to cut that overspending and keep on track with your budget.

What happens if you spend over your budget?

Spending over your budget can give you a sense of failure and that you’re not doing things right.

If you spend over your budget, you have two options: first is to pull funds from a different budget category, and second would be to accrue debt to make up for the difference.

Ideally, you will have the ability to pull from a different budget category to avoid going into debt. But if you have overspent on your entire budget, you have few options left other than to use debt to pay for the difference.

The important thing to remember is, if you are using debt to pay for your overspending, to allocate money in your budget next time to pay off that debt immediately. That way, you are not accruing more debt and the interest that comes with it.

Overspending is something that is totally controllable and does not need to be an issue with your budget. With a few budgeting strategies implemented, you’ll be able to get in control of your money and have fewer, if any at all, overspending episodes.

What are some strategies for following your budget and not overspending?

Overspending is incredibly easy to do, unfortunately. Luckily, there are some strategies that give you the fighting chance you deserve to stick to your budget and succeed with your finances.

1. Use cash envelopes for each budget category. Once you run out of cash for a category, you’re out.

Cash envelopes have been such a huge help for us. Not only do they keep our budget in check by showing us at all times how much we have in each budget category, but using cash has also been proven to activate pain centers in the brain.

That makes it more painful to make purchases than using a credit card!

In fact, an entire study was dedicated to using a credit card versus using cash to make purchases. The results were really interesting:

“Credit cards effectively anesthetize the pain of paying,” said George Loewenstein, Carnegie Mellon professor of social and decision sciences (SDS) and co-author of the paper. “You swipe the card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.”

https://www.cmu.edu/homepage/practical/2007/winter/spending-til-it-hurts.shtml

In other words, using a credit card enables you make a purchase and not truly feel the effects! Swiping a credit card feels nothing like using cash, because you are not physically handing over your hard-earned money.

This is why I LOVE using cash envelopes. There’s the benefit of feeling each purchase (which could curb that overspending!) as well as having a much easier time sticking to your budget.

Here are a few of my favorite cash envelopes out there:

For a more comprehensive list of cash envelopes, I put together a long list of options for you to check out here.

2. Implement a budget binder to visually see how much is allocated to each category.

Budget binders are great because they hold all of your finance matters in one spot. If you are a paper and pencil kind of person or just like having all of your finances laid out in front of you in one booklet, you need a budget binder.

Budget binders can hold your:

  • monthly budget
  • savings trackers
  • debt trackers
  • monthly bills
  • income
  • personal goals

Since a budget binder does keep track of your monthly budget, it’s easy to flip to your current budget month and check on the status and limits of each budget category.

Here are a few budget binders that I really like:

For a complete list of great budget binders, check out this list of budget binders here.

3. Make adjustments to your budget when something is not working.

This tip is SO, SO IMPORTANT.

Your budget should never be a stagnant, unchanging finance tracker. In fact, it’s best to sit down each paycheck or once a month to iron out your budget and make sure everything is correct.

If you find yourself overspending in the grocery budget category month after month, it looks like you have allocated too little to that category.

You’ll have to either cut off your spending for groceries and make sacrifices (not always a bad thing), or you will have to cut down another budget category to beef up your grocery category.

Doing check-ins with your budget and making adjustments as needed ensures you stop overspending in your budget categories.

4. Try out the no-spend challenge

This doesn’t mean you spend absolutely no money during the challenge!

During a no-spend challenge, you will only be spending money on the absolute necessities.

Necessities can include:

  • Mortgage/rent
  • Utilities
  • Food
  • Common monthly bills, like cable, phone, internet

Here are things you should not be spending money on during a no-spend challenge:

  • New clothes
  • Coffee shops
  • New toys for the kids
  • Vacation
  • Eating out

There are different varieties of the no-spend challenge, depending on how much you want to save:

  • No-spend day
  • No-spend weekend
  • No-spend week
  • No-spend month
  • No-spend year

My favorite way to start the challenge is to do a no-spend weekend. It’s a small enough window of time to see some serious savings, but not so long that it feels like too much. Then, once you feel confident in the challenge (and how much you can save!), build up the amount of time.

For a complete overview of the no-spend challenge and how much you can save for each challenge, see this in-depth post.

How can we stop overspending money?

Overexceeding your budget is incredibly frustrating. Not only because you broke the budget, but also because it was completely in your control.

The best way to ensure you stop overspending your money is to use the cash envelope system. This system forces you to use cash for all of your purchases and allows you to see how much is left in each budget category very easily and quickly.

By implementing the cash envelope system, you are forced to stop overspending because, once the cash runs out in a particular budget category, it’s out until your next influx of money (payday). And if the purchase is completely necessary but you are out of money, you must use funds from a different category and skrimp in that category instead.

In another study where the subjects were tested on how much they would offer for baseball tickets using a credit card versus cash, the results were pretty big.

Here is a quick-and-dirty breakdown of their results:

Form of paymentAverage amount offeredMedian amount offered
Cash$28.51$25.00
Credit card$60.64$41.00
Study completed by Drazen Prelec and Duncan Simester

Can you believe it?! The average amount offered for these baseball tickets was less than half when using cash!

This goes to show how your psyche changes when you use cash and not a credit card. And this is one very effective way to stop overspending your money!

Using cash envelopes forces you to only use cash for purchases, which could in turn make you think twice about each purchase you make (and how much you spend on those purchases).

How to control spending habits

If you are implementing the cash envelope system and continuously updating your budget, but still having an issue spending, there is one other rule you can implement to help curb your overspending.

To control spending habits, implement the 24 rule or 30 day rule before making the purchase.

The 24 hour rule should be used for smaller purchases; anything under $50. If the purchase is not necessary or will send you over in one of your budget categories, wait 24 hours to make that purchase. If you can justify it and still need it at the end of that 24 hour period, purchase it and pull money from a different budget category.

The 30 day rule should be used for larger purchases; anything over $50. If the purchase is not necessary and will cause you to overspend, wait 30 full days to make that purchase. If you can justify it and still need it at the end of those 30 days, purchase it and pull from another budget category.

This will also give you the time to save up for that purchase in the 30 day wait period. Then, if that purchase is not necessary and can be pushed off into the future, you can use that saved money for something else.

Each of these strategies that make you wait to make a purchase force you to stop and think: “do I really need this?”. In a lot of cases, the answer is “no” or “not right now”.

As time goes by, this wait-to-purchase rule will stick and become a prominent piece to your decision making. Eventually, it will become second nature to wait to make any unnecessary purchases!

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