Nine signs you're spending too much

Over-spending? Here are the warning signs to watch out for...

It’s easy to go through periods when you spend too much. We’ve all done it, I’m sure. And let’s face it, no matter how carefully we budget, some expenditure can’t be planned or postponed: the car breaks down, the boiler needs repairing, or there’s a big wedding or family event to go to.

Often, though, short periods of over-spending correct themselves. We have an expensive month -- and the following month, with a little extra prudence, we don’t spend as much, and things are back to normal.

But a period of sustained over-expenditure is worrying. And it’s worrying for three reasons. First, it shows that we’re not as in control of our finances as we thought. Second, it means that we’re not able to save and invest as much as we should. And third, it probably means that we’ll be paying a hefty interest bill.

So here are nine warnings signs that tell you it’s time to rein back your expenditure, and find other -- and less expensive -- ways of getting by.

Early warning

The slippery slope isn’t particularly steep at the start -- so detecting over-expenditure can be tricky. At this stage, corrective action is straightforward and relatively painless: going out a little less often, perhaps, and prioritising debt-repayments -- and saying ‘no’ a little more often. The warning signs to watch for:

• You’re going to the cash machine more frequently.
• Your credit card balance isn’t being cleared off each month.
• You’re buying things on impulse, without research, and without really needing them.

The main issue at this stage -- apart from repaying those smallish credit card debts -- is about buying more effectively, getting better value for money, and not spending money that you don’t have to.

Signing up to some goals will help you to achieve this.

• Adopt our goals: Lower your household bills, Cut your food bills, and Cut your car costs.

Cause for concern

At this stage, you’re secretly aware that you’re spending too much -- even if you’re not admitting as much to partners and friends. You’re also likely to be justifying expenditure to yourself -- “I’ve had an awful month, so I deserve it” -- and probably splashing out on big-ticket items as well.

But make no mistake: as well as getting your expenditure back under control, there’s a mounting debt management issue to address: paying less interest on your debt, paying it off faster -- and stopping it growing. Some typical warning signs:

• You’re justifying expenditure with special excuses. (“I’m worth it.”)
• Your credit card balance is mounting.
• You’re spending a lot on ‘big ticket’ items such as holidays, cars, boats, and caravans.

If this strikes a chord, then the reality is that you’ll have to make some lifestyle changes. You’ll need to get smarter at spending the money that you do have, and altogether firmer with yourself when it comes to being self-indulgent.

• Adopt our goals: Manage on a small budget, Have a cheap holiday, Pay off credit card bills.  

Emergency stop

At this stage, you’ve got a problem. In short, over-spending has become a problem, and it’s time to address matters before the onset of serious trouble. Simply put, you’ve got a significant amount of debt, and some painful readjustment of priorities is necessary.

The good news: you’re not alone, thousands have gone ahead of you -- and experience suggests that you’ll emerge as a stronger, wider and more frugal person. The warning signs to watch for:

• You’re not opening your bank and credit card statements
• You’re making only minimum payments on credit cards
• You’re close to -- or exceeding -- your credit limits

At this stage, reduced expenditure is a priority, and probably a painful one. And how prolonged it needs to be depends on how much debt you’ve got yourself into.

• Adopt our goals: Destroy your debt, and Make some extra money. 

The bottom line

Money doesn’t spend itself. We spend every pound of it -- even if it’s only passively, via subscriptions, standing orders and direct debits for things we no longer really need or use.

But you can only spend each pound once. So make sure you’re spending it wisely.

Fortunately, lovemoney.com has a fabulous tool to help you budget and keep an eye on your spending. All you need to do is register for our newly-launched online banking service. This will allow you to see all your transactions in a categorised pie chart over the past month, so you'll be able to see at a glance what you're spending your money on.

Finally, if you have any further tips, why not post them in the comments boxes below? Or if you have a burning question about your spending habits, why not wander over to Q&A and ask other lovemoney.com members for advice?

More: Five ways to slash your interest bill in 2010 | Rent your way to a fortune