Tips on how to avoid overspending and sticking to a budget

1Consistently running out of money before payday

Living paycheque to paycheque could mean that one's income is spent as soon as it's received, leaving little to no room for savings or unexpected expenses.

2Rising credit card balances

The average credit card debt per household in the UK has risen to £2,518, which is a 6.38% increase from 2023.¹

While credit cards can be beneficial when used responsibly — helping build a positive credit history, providing statutory protection on some purchases, and with some credit cards offering rewards — rising credit card balances often indicate an overreliance on credit to fund lifestyle expenses.

That’s why it's crucial to pay off as much of the balance as possible each month. Consistently making only the credit card minimum payment could mean interest charges will accrue, ultimately costing far more in the long run.

Learn more about how a credit card works.

3Frequent impulse purchases

Impulse purchases are unplanned buys made without considering the necessity or affordability of the item. Examples of impulse purchases include grabbing a chocolate bar at checkout, buying clothes on a whim, or spontaneously ordering a takeaway.

Online shopping, with its targeted ads and one-click ordering, has made it even easier to impulse spend. These seemingly small purchases can quickly add up and significantly impact a budget.

4Avoiding financial statements

Avoiding financial statements and transaction history is a form of financial avoidance behaviour, perhaps indicating an unwillingness to confront the reality of spending habits.

Instead of shying away, it's crucial to be proactive. Regularly checking transaction history reveals where money is going — and it's the first step to determining where to cut back.

5Borrowing from friends and family

While occasionally borrowing small amounts from loved ones may be unavoidable, regularly needing loans from family or friends is a common sign of overspending.

6No savings or emergency fund

A third of UK adults have less than £500 in their emergency fund — a sign that many individuals either are not able to save much or have no savings to prepare for unexpected costs.²

Building an emergency fund provides a financial cushion for unexpected events such as job loss, medical bills, or car repairs. It offers peace of mind when faced with these expenses.

1Spread costs

Larger purchases can sometimes make it difficult to manage a budget effectively. Using a credit option like PayPal’s Pay in 3* can help spread the cost of larger expenses (such as electronics or home appliances) over a more manageable timeframe.

2Create a budget

Not sure how to create a budget? Here’s some guidance:

• Track income and expenses. Keep a record to understand where money is going.

• Identify needs vs. wants. Differentiate between essential expenses and non-essential ones where it’s possible to cut back.

• Set realistic goals. Start with small, achievable goals and gradually increase them over time.

• Use budgeting tools. Explore budgeting apps or PayPal tools to track spending and allocate funds for necessities, savings, and discretionary spending.

Learn more about how to budget.

3Prioritise saving

Opening a savings account and making regular contributions is an important step for those looking to set financial goals and achieve stability. Even small amounts can add up over time.

For more benefit, try automatically transferring a portion of income into a savings account each month. This ensures that saving becomes a consistent habit and helps build a financial safety net for the future.

4Monitoring spending

Regularly reviewing bank and credit card transactions provides valuable insights into spending habits and helps identify areas where it might be possible to reduce expenses.

Don’t know how to monitor spending? Budgeting apps or expense tracking tools can help — they’ll often categorise expenses, provide visual representations of spending patterns, and send alerts when approaching budget limits.

5Reduce impulse purchases

Impulse buying can massively derail a budget. Using this strategy can reduce unplanned purchases:

• Institute a waiting period before making non-essential purchases. This allows time to consider whether the item is truly needed and affordable.