7 Tips for Clients Who Overspend: Advisors’ Advice

Slideshow April 22, 2024 at 11:35 AM Share & Print

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Nearly three-quarters of Americans report having an overspending problem, 55% admit to reckless spending and 45% say they have cried over their purchasing habits, according to a Clever Real Estate survey.

Nearly 30% reported they’re afraid to check their finances, according to the firm. The vast majority of survey takers said they’d consider a second job to earn more spending money, and over a third said they’d consider posting content to the adult social media site OnlyFans for more cash.

Despite consumers’ concerns over their spending habits, 40% of Americans said if they came into a surprise $10,000 windfall, they wouldn’t save any, Clever found.

We asked financial advisors what advice they give to help clients address harmful spending habits. Here are seven tips ranging from the emotional to the practical. Answers may be edited for length or clarity.

(Credit: Adobe Stock)

Dinah Wisenberg Brin

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1. Consider therapy.

Many folks need therapy to get past their issues, regardless of whether they present as emotional or financial troubles. Overspending is usually an emotional response to some sort of stress, so seeking therapy to deal with the root of the problem is critical.

To clients that overspend to satisfy emotional insecurities, I recommend a financial coach or therapist. It's important to peel back the onion to uncover the real problems.

Everyone faces some sort of challenge, but it's important to face it and deal with it.

— Noah Damsky, principal, Marina Wealth Advisors

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2. Avoid credit cards.

If you can't pay off the balance of a credit card every month, don't use it.

I worked with a client who had somehow accumulated over $20,000 in credit card debt because of a shopping addiction. Because her APR was over 20%, I suggested she consider a loan from her 401(k) to pay off the balance. 401(k)s allow up to $50,000 to be borrowed. I reminded her that she will pay this money back plus interest within five years.

After helping her tackle this debt, I advised her to start using debit and cash instead of credit cards for day-to-day purchases. Doing this puts up natural barriers to prevent overspending.

— Daniel Masuda Lehrman, founder and lead financial planner, Masuda Lehrman Wealth

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3. Stick to a list.

I’ve found it helpful to follow this short list to address harmful spending habits:

Budget creation: Establish a detailed budget that outlines income, expenses, savings and spending goals.
Pause before spending: Reflect on whether a purchase is necessary or a want.
Limit access to money: Freeze credit cards or keep them less accessible.
Use shopping lists: Stick to a list when shopping to avoid impulsive buys.
Set spending limits: Assign limits for each category.
Anticipate regret: Imagine future consequences before spending.
Focus on goals: Prioritize long-term financial aspirations and pair them with short-term goal setting.

This can be made into a fun activity for individuals or partners.

— Gregory Guenther, co-founder, financial planner, GRANTvest Financial Group

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4. Accept your limits.

The key is understanding themselves and their financial limits. Once they come to peace with those assumptions, that is what financial planning is all about. Inventorying assets and liabilities but also identifying cash flow needs.

We will never say, "Bet you can't spend yourself into trouble." It is one reason many professional athletes are financially broke despite their income.

— David Demming, founder and president, Demming Financial Services

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5. Put essential needs first.

Overspending is not generally something done once and then regretted. Overspending is something that often occurs month after month and becomes more of a habit. Habits are much harder to break and deal with than a one-time vacation that got a little out of hand.

I go back to the conversation I had with my husband when we were first married, struggling with student debt and just starting out in our careers. "Do you want this? Or do you need this?"

If the answer was genuinely "Yes that we needed it," then we would make the purchase. But until we got on level footing financially, we tried to mostly do "needs" purchases and not splurge on too many "wants."

— Crystal McKeon, chief compliance officer, TSA Wealth Management

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6. Track your spending.

People who are truly harming themselves with overspending should look into a program to help them. For everyone else, here are some ideas.

Looking at your spending is the first step to controlling it. You can put everything on a credit card and review it each month. Many budgeting apps will put purchases into categories so you can see how much you are spending on different areas of your life.

Then look at each item and consider whether it is something you need or something you want. Needs are food, utilities, phone/wifi, transportation to work. While wants make life more comfortable, but you don't truly have to have them.

Give yourself a budget for those wants. One possible way to manage them is to use a separate credit card for wants and have a self-imposed monthly credit limit.

The bottom line truly is looking closely at your spending. If your family were in harm, you would do anything in your power to protect them. If your spending is out of control, you are hurting your future for yourself and your family.

— Carol Fabbri, principal, Fair Advisors

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7. Don't shame or blame.

You cannot be behind on your path! Whatever's happened made you who you are today. Shame and blame have no place in finance. Ignoring spending only makes things worse.

Make the best decisions you can now. Consider reviewing each expense over the last month. Was it worth it? If so, what made it great? If not, could you reduce or cut it? Small changes have a big impact over time!

— Kevin Estes, founder, financial planner, Scaled Finance

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