Though the character of Rebecca Bloomwood in Confessions of a Shopaholic (as seen in the film version above) is supposed to be an over the top exaggeration and your worst nightmare of what it’s really like to be addicted to shopping, her reasoning for her problem or how she justifies it may sound familiar to some.
But when does that little shopping problem you have go over the line into a full on major spending issue that leaves you in complete disarray? We talked to some experts about the major signs that you’re in a danger zone, which requires fast action.
When Spending Goes Over the Line
“Spending becomes a problem when you’re wasting money–for some, that might mean buying things that they’ll never use, and for others, that means spending prevents them from reaching short, mid- and long-term goals,” Financial Planning Coach Mindy Crary said. She believes overspending happens for four reasons for women specifically.
- Avoidance activity: The woman is spending so she doesn’t have to think of something else.
- Addiction activity: The woman is spending because it puts her in that addiction “fog” that soothes while it lasts.
- “Meaning” actvity: The woman sees her spending as contributing to the vision she has for her life, and she feels like she needs to buy specific things to fit her image.
- Unconsciousness: The woman has never bothered to do the math of her spending.
“All four kinds of spending need a lot of thought and behavior management to fix, over many months if not years,” she says.
When You’re in Dangerous Waters
Denise Winston, financial expert and author of Money Starts Here! Your Practical Guide to Survive and Thrive in Any Economy, and Taynia Aarnink, founder and creator of The Fiscal Flamingo say to watch out for the following:
- You don’t even want to get/open your mail because you know it is bills, bills, bills
- You get packages delivered to your front door step and you can’t recall what you ordered
- You have stuff or shopping bags lying around with unopened/unused items with the tags still on them
- You spend more than you earn
- You avoid looking at your credit card statements
- Your paycheck is gone before you get it
- You think the next purchase is going to solve your latest problem
- You hide your purchases from your family and/or significant other
- You feel guilty after making a purchase
How to Nip it in the Bud
Now that you have acknowledged the issue, let’s deal with it. Here are some action items that can help your financial state. It’s going to be hard work, but it will be worth it in the end. Cristina Briboneria, Vice President of oXYGen Financial, Inc., offered the following advice:
- Take inventory: Figure what actually hits your bank account every time you get paid and determine which of your expenses are mandatory. After that, determine how much you can put toward your debt. Also take inventory of how much total debt there is from interest rates, credit cards, school loans, car, mortgage, etc. This will help prioritize which cards to attack first.
- Pay off highest interest rate credit cards: These are typically your store/department store cards, which typically have interest rates of 22 percent or more. If you miss a payment, they can go up to 29 percent.
- Ask yourself, “Do I really need this?” before you buy anything. Nine times out of 10, you don’t need it, and you can put the item down.
Budget in shopping. The biggest downfall to most budgets is failing to add a line item into the plan that says “fun” or “shopping.” When you don’t plan for it, then the debt just happens, and it builds up without a plan to pay it down.
Jessica Williams, Marketing Communications/New Media Coordinator for Consolidated Credit Counseling Services, Inc., tells Levo, “The biggest and most effective way to break this habit and begin to gain control of your finances is to put in the effort needed to reverse the bad habit.” She suggested these for gaining financial control of your life:
- Create a realistic monthly budget. Cut back in the areas that are necessary for your financial survival like shopping, eating out, and making other unneeded purchases.
- Educate yourself to gain better money management skills. Learn the rules and methods needed to balance your personal finances including monthly bills, credit cards, and investments.
- Pay at least the monthly minimum on as many bills as possible, if not all of them. If and when possible, prioritize your credit card statements by paying more on the cards that hold the highest interest rates. Once you have gotten caught up on your monthly minimum payments, begin to take the steps toward paying off your entire cards balance in full by starting with those high-rate cards and working your way down toward those low-rate cards.
- To insure that all of your monthly payments are made on time, you may be interested in setting up automatic debit payments with your bank to insure that your bills are paid on time each month.
- Start up a savings “rainy day” account to help with the effort of maintaining the positive habits that you will learn when prioritizing and budgeting.
- Pay all of your purchases with cash, checks, or a debit card instead of on a credit card with borrowed funds.
- When you want to buy items that are out of your budget, create a “wish list” and set up a budget to save money for your wanted item, without sacrificing items that you need to pay for each month.
Elle Kaplan, CEO and Founding Partner for Lexion Capital Management tells Levo, ”Changing unhealthy financial habits can be daunting, but it’s very possible. The trick is to use a simple, straightforward strategy, and make it easy to stick to it. Remember, you’re building a strong financial foundation and preparing for the future–that’s something to feel fantastic about, and it will last much, much longer than the latest ‘gotta have it now’ item.”
How do you stick to your budget each month? Let us know in the comments below.
Ask Levo mentor Bettina Boccadifuoco about her career in finance!