Spending creep happens when you slowly start spending money outside your budget. You might spend a little extra when you learn you get a raise. Or when you get a tax refund. Or maybe there’s some special occasion this month and you’re only going to do it this once. Spending outside your budget one time will lead you to justify it another and another. Before you know it, you’re not sticking to your budget at all. Most people end up blaming the budget rather than their spending habits.

You can avoid spending creep all together by not starting it at all. Only spend what’s included in your budget. If you get a windfall or your income increases, adjust your budget for that month. You’re less likely let spending creep become a habit that way.

If you’re already caught in a trap of spending creep, pull your budget back out. Make sure it accurately reflects your income and spend only based on your budget.

Sales are marketing tools that businesses use to get people to spend money. Everyone likes to think they have power over the money they spend and what better way to exercise that power than by getting something for cheap. Only, you end up spending more money than you originally planned, so the store is the real winner.

Think about this, if you weren’t planning on buying the sale item anyway, have you really saved any money? I’ll answer that for you. No. It doesn’t matter how much the item was marked down, you actually spent more money than you saved.

Everytime you see a sale, remember this: a sale only saves money when you would have bought the item anyway.

Your hobby might not be quilting, it could be golfing or movies or socializing, but it can still get expensive. It pays not only to have a budget that guides your spending, but to “post-budget” where you look at what you spent during a month. If your hobbies are taking up more than 5% of your budget, it’s time to re-evaluate. You have a few options

Make money from your hobby

The easiest way to offset the costs of a hobby you love is to figure out how you can make money from it. With quilting, I can easily start selling the quilts. That would cover the cost of making quilts and give me some extra money to save.

Find a way to do it cheaper

If your hobby was reading and you found you were spending hundreds of dollars on books each year, you could start spending more time in the public library. Or, find some friends who also reads books and trade with them. Purchase used books instead of new books. Sell books after you’re done with them. Or donate them and deduct them on your income taxes.

Do it less frequently

Another way to lower the cost of your hobby is to do it less often. Instead of going to the movies every weekend, go once a month.

Hobbies are meant to be fun, but it won’t be fun when your hobby makes you go broke. Spending thousands every year won’t help you reach your financial goals (unless your goal is to be broke). So you have to make some tough decisions when it comes to spending money on hobbies.

By all means you should enjoy your raise, but spending it on consumable goods, isn’t the wisest thing.  If you’re already living comfortably, it’s actually stupid to just spend the money.  You’ll unnecessarily inflate your standard of living making it nearly impossible to realize you’ve gotten a raise.

Dumb things to do with a raise

• Buy a new car, especially a larger, gas-guzzling one
• Go on an extra vacation
• Buy more expensive clothes
• Hide it under your mattress
• Spend it before it shows up in your paycheck

Smart things to do with a raise

Pay Off Debt

When you get extra money, put it toward your debt, especially high interest credit cards and loans.  Stretching out your payments means you pay more interest to the banks than you would if you’d paid the debt sooner.  Paying off debt sooner rather than later saves you money in the long run.

Invest and Save

It only makes sense to put your money toward something that will make more money, rather than something that will only cost more money.  Put your raise in a high-yield investment or savings account.  Let’s say your raise gives you an extra $250 a month and you put it into an investment that gives you 7% a year.  After 5 years, you’d have $21,477.  If you spent that money, after 5 years, you’d have $0.

The same is true of your money.  If you have a goal to save $10,000 in the next 3 years, you’ll be putting money in your paycheck each pay period.  You’ll save windfalls instead of splurging them.  You’ll do less frivilous spending and more saving.

On the other hand, if you don’t have any money goals, you don’t have anything guiding your spending.  You’re more likely to blow all your money.  Unless you plan to work your entire life, i.e. retire on nothing, this isn’t a good idea.

So, start making some goals for your money.  If you already have goals, review them to make sure they’re still relevant.

How Envelope Budgeting Works

Start by writing out your budget on paper.  Decide your spending categories (e.g. food, rent/mortgage, utilities, etc.) and how much you will spend in each category each pay period.

Then, make an envelope for each spending category.  On the outside of the envelope, write the name of the category.

Each pay period, divide your money for each spending category based on your budget and place the money inside the corresponding envelope.  When you’re ready to spend, take the money from the appropriate envelope.

Envelope Budgeting With Checking Accounts

Envelope budgeting works best with cash since the physical absence of money from an envelope will keep you from spending it.  However, the world of direct deposit and debit cards, managing your money this way can be difficult.  Here’s some suggestions.

• Don’t deposit your checks (or withdraw your direct deposits) so you can manage with cash.  Then, if you prefer to pay certain bills with check, deposit the money before paying the bill.
• Open multiple checking accounts.  If you have several spending categories, I don’t suggest opening a checking account for each one.  On the other hand, you might open a second checking account to separate bills and other necessary expenses from spending money.
• Use an envelope budgeting software to help categorize and manage your spending.

Tips to Make It Work

• Stick with it.  It might take a few months to get the system to work for you, so don’t give up too soon.
• Get the family involved.  Make sure to include your spouse and children.  Even if your kids are too young to spend, you can explain why you’re diving the money and spending from envelopes.
• Don’t throw away leftovers.  If you have money left in an envelope, put it toward savings.

Now’s the time to make some important decisions about the money you’re spending.  You might have to say no to some things and cut out some of your expenses to make your paycheck stretch.  If you don’t do it now, you can easily find yourself living above your means, which can lead straight into a hole of debt.

Look at one of your past billing statements to see where you typically spend your money.  Are there places that you can cut back?  A few weeks ago, I showed you how I cut my monthly expenses by $100.  You may be able to cut yours by more.

Decide what you have to spend money on and what you can live without.  The things you can live without, live without them.  As the cost of living increases, you’ll be glad you made spending adjustments sooner rather than later.

It’s the exact same way with spending money. If you spend without paying attention to what’s going out or what’s still left in your wallet, you’ll find yourself in pretty bad shape. But, if you’re fortunate enough to have a very large cushion in your bank account, you have nothing to worry about. Any person who’s had to work to accumulate wealth will tell you, you can’t build a cushiony bank account by spending like you’re blind.