Overspending. The bane of every thoughtful budgeter. Sometimes it’s the result of poor impulse control, other times it’s out of your hands.
I have recently fallen victim to an overspending quadruple whammy. It went something like this:
Extremely last minute holiday shopping, for which I am going to incur costly international shipping rates to get things out of Japan and into my family’s hands on time. Extremely last minute as in, I still need to make the shopping list and go do the shopping as soon as I finish penning this article.
A pre-holiday vacation plus a holiday vacation. Honestly, what the heck was I thinking there?
Add to that an unexpected climatic event! On my recent vacation to Bali, we ended up stuck in paradise for a few extra days when a volcanic eruption held up flights off the island, which blew up our budget unexpectedly.
And then when we finally did get back, we flew straight into a brand new, unfurnished apartment. Vacation + volcanoes + holidays + furniture = pain. The “don’t even want to peek at the credit card bill” type.
Suffice it to say, my beautifully planned budget for December is in a shambles. To make matters worse, I have given up and just started piling on. And it’s that phenomenon that I’m interested in exploring a bit today in this article.
I’m sure some of you reading this are familiar with this psychological peculiarity: you break your budget and then step on the spending gas, rather than ratcheting down your purse strings. We might call it the “another drop in the bucket” effect.
I have overspent big time this month on a bunch of things I typically don’t, but instead of trying to cut spending elsewhere to mitigate the damage, my spending has been hog wild across the board.
For example, one big missed area of opportunity would have been in food. Usually, I’m pretty skewed towards cooking at home vs. eating out. That lifestyle choice is partly for frugality’s sake, and partly because I’ve been working hard lately at becoming a better chef. If there were ever a time to keep that habit up, it would have been now.
This month however, I’ve spent more on eating out (vacation excluded) than any of the last three months. I’ve done just the opposite of what would have made sense for my sticking to my budget. What’s going on here?
I must say, I’m dismayed to report that after some cursory investigation, I’ve been unable to find any research or writing that focuses on this particular spending behavior.
However, I don’t think I’m alone in having experienced it. So, in light of having no expert opinions to share, let’s do a post-mortem on my overspending to see if there are any learnings we can take from it, and any steps that I could have taken to limit the carnage.
- I under-budgeted to begin with. This put me in a losing position.
I hadn’t set aside enough money for my vacation to accommodate unexpected changes to my travel itinerary. Arguably, not my fault, but given the psychological snowball effect this had on my spending, not a great way to start the month.
- I had big lifestyle changes in a short period of time, for which I hadn’t planned sufficiently.
While on vacation, I was spending more than normal on eating out and activities. And while that extra spending had been planned before I left, it has been very hard to adjust back to hyper-frugality, given the fact that I don’t have any pots and pans in my apartment to cook with. Now, since kitting out the kitchen, I am now just a few days away from another big trip, and don’t want to leave food in the fridge to spoil. Hence, lots of restaurant trips these last two weeks. The common thread here is lifestyle changes, without some pre-planning as to how it would impact my budget. If I had been thinking about this problem with my head instead of my credit card, I would have prioritized purchasing kitchen items and grocery shopping over a bookcase and a shelving unit.
- When I broke my budget, I avoided the issue, rather than confronting it.
Classic mistake. When I had that nagging sense of, “oh, I’m spending too much money these days”, I actively avoided looking at my credit card bill, for fear of what it would show me. I should have fired up Tiller right away, done some quick accounting, and come up with a new, realistic budget for the remainder of the month. I didn’t do that, instead opting to ignore doing anything about my overspending while at the same time mentally agonizing over it.
- I rationalized my overspending via artificial time horizons, rather than coming up with a plan to get back on budget over an extended period.
Each time I’d go out to eat, I’d tell myself, “Well, it’s the holidays, you didn’t plan to be stuck on vacation for an extra 3 days… You’ll straighten things out in January. Just relax and have fun.”. While this might be true, I’m digging myself a bigger hole in the process. By boxing myself into thinking that my budget must be viewed on a monthly cadence, simply because that’s how I normally do it, I rationalized my overspending without any plan to make up for it in the future.
Rather than thinking that I’d hit the reset button come January, I ought to have re-budgeted now, perhaps looking at the coming three month period. This would have given me some greater perspective on how to straighten my course and start making changes to my spending and lifestyle right away. Now, I’m instead faced with a much bigger deficit to make up for when I start the new year.
I hope my tale can serve as a cautionary tale for others. If not, at least you can commiserate if you’re in the same boat.
To that end, I offer you all this poem as a paean to overspending during the holiday season:
Oh the weather in Bali’s delightful,
But that volcano is looking frightful.
When your plane is supposed to go,
Let it blow, let it blow, let it blow!
Now that your holidays just aren’t stopping,
Let’s just keep on shopping.
Until you finally get on that plane,
Make it rain, make it rain, make it rain!
And when you return to your home,
How you’ll hate that you’re sleeping on the floor.
Your futon’s just a thin piece of foam,
So off you’ll go to the store!
And when your presents aren’t purchased,
For even a single person on your list,
Don’t look at your credit card bill,
To the till, to the till, to the till!
Oh it doesn’t show signs of stopping,
And I’ve brought my budget for popping.
When it looks like there’s just no end,
Overspend, overspend, overspend!
By Michael “Jones” McCarron
Passionate about financial technology and lifestyle design, Jones is currently living and writing in Japan, eating ramen and thinking of better ways data visualize the amount of money he spends doing it. Before moving to Japan he was working for Capital One Bank, building better customer experiences into their suite of mobile finance applications.