Does it feel like you’ve been hemorrhaging money? Whether it be surprise bills, special events, or rampant stress-shopping, sometimes our spending gets out of hand. It can feel like money is flying out of your pocket whether you want it to or not!
Here’s how to regain control.
How To Stop Hemorrhaging Money
In a perfect world, you’d stop the bleeding with an emergency fund and a sinking fund. Both of these savings accounts prevent life events from bleeding you dry.
However, we don’t live in a perfect world. It’s unrealistic for me to tell you to stop hemorrhaging money by using your sinking fund if you don’t have a sinking fund.
Here’s what you can do to stop hemorrhaging money when you don’t have a cash backup plan.
What to Do When You Are Hemorrhaging Money
Step 1- Regain Control
Hemorrhaging money can make you feel out of control. The first step to regaining that control is to catch your breath. The stress of overspending can lead to more overspending. Experts call this phenomenon emotional spending, but it’s commonly referred to as retail therapy.
Emotional spending is a coping mechanism that helps you feel more in control of your money, but in reality, it does the opposite.
The first step to ending overspending is to regain that control.
It can start with finding healthier, more productive ways to deal with stress. Start with self-care ideas that can help you reset at home. A relaxing bath, journaling, and exercise can be healthy outlets for stress that don’t affect your pocketbook. Consider redirecting to one of these activities when you feel like hitting the mall.
Now that you’ve caught your breath and feel better about yourself, you can focus on fixing the problem.
Step 2 – Identify the Problem
The next step is to identify the reasons why you are overspending. We’ll dive into four super common causes of a money hemorrhage and identify ways to stop the bleeding on each one.
Everyone has different reasons and life experiences, so it’s okay if your specific problem isn’t listed. Most of these tools can be tweaked slightly to work for any reason why you might be hemorrhaging money.
4 Reasons You Might Be Bleeding Money
Non-Stop Financial Emergencies
The most common reason people feel they are hemorrhaging money is emergencies and surprise bills. Often it doesn’t end in one. Emergency after emergency rears its ugly head, and it feels like a new fire pops up the second you extinguish an old one.
I was in this boat a few years ago. In a matter of months, I had to spend four hundred dollars to fix a heating wire, another five hundred to fix a problem with insulation, and a terrible freak accident with my cat that cost nearly four thousand dollars. The entire year felt like a giant financial emergency, destroying my attempt at a no-spend year.
Unexpected expenses are the bane of our existence, but there are ways to either plan for them or mitigate the damage they do.
The Best Defense Against Financial Emergencies
The best defense against hemorrhaging money in an emergency is an emergency fund. An emergency fund holds cash, so it’s available when needed. Having this buffer will help you feel in control in these stressful situations.
Let’s be realistic, though. If you feel like you are hemorrhaging money due to emergencies, you probably don’t have an emergency fund, or you’ve used it all up.
I know it sounds challenging to start one at times like this, but it is the best way to prevent more hemorrhaging in the future. Open an account today and start putting a few bucks in each paycheck. The following emergency will be less stressful and much easier to manage.
When You Don’t Have an Emergency Fund
Hopefully, you aren’t at that next emergency yet, so you have a bit of breathing room. You need to figure out how to pay off the debt you incurred and boost your emergency fund to prevent a similar situation in the future.
Now is the time to cut spending in other places. Cheap out on groceries for the next few weeks, skip the date night, and bring lunches to work. There are thousands of ways to save money. Use some of the tips we offer to examine your spending habits and find ways to cut back:
- Save money on basic living expenses
- Save money on heating
- General money-saving tips
- Cheap meal ideas to save money
- Take advantage of free food to save money
The money you save can pay off the emergency and build your fund to weather future storms.
A final resort is to use a credit card to pay for the emergency and then consolidate the credit card debt into a personal loan with a company like Upstart.
Upstart offers lower interest rates than most credit cards, so that you will save money in the long run. Check to see if you qualify!
Special Events Eat Into Your Cash
Sometimes, lots of stuff pops up all at once. And yeah, maybe we knew about some of them and should have planned better, but perhaps some of them crept up on us.
After the fun of Halloween and Thanksgiving, we’re often surprised to find Christmas right around the corner. Although these holidays occur at the same time every year, they still sneak up on us.
The same may happen with birthdays, anniversaries, or other special events. We may forget a niece’s birthday, get a last-minute wedding invite, or remember the annual RV show is next week. All of these things cost money.
Planning is Best
The best way to stop special events from sneaking up on you and eating all your money is to plan for them. Mark them in your calendar with reminders, and put money aside for them with each paycheck.
If you haven’t yet, open up a sinking fund, a separate bank account where you save for specific things. I have a sinking fund for both travel and home repairs. Unfortunately, I didn’t have enough in either of those funds to cover all the travel and home repair expenses, but the little bit I did helped me not to use all my emergency funds.
Unplanned Special Events
We don’t always know about special events in advance; sometimes, even when we do, they sneak up on us.
One way to ease the burden of special events is to cut back elsewhere. The money-saving tools we listed above will help you find extra money in your budget for fun activities and celebrations that pop up over the year.
If you are really struggling, you can also skip the event. Although, as social creatures, weddings, parties, celebrations, and get-togethers are essential, sometimes we must take a hard look at our finances and decide not to attend.
Consider whether you’d have to dip into investments or rely on credit to attend. You may also want to prioritize events based on their importance to you, your family, or your life goals. Perhaps you should go to your sister’s wedding but can skip the yearly art festival with friends.
People who genuinely care about your well-being will understand if you can’t make every event.
A significant way we hemorrhage money is through rampant, uncontrolled shopping. Sometimes, when we feel bad about ourselves, we just want to buy all the things. And sometimes, when we are hemorrhaging money in other ways, buying everything makes us feel more in control of our spending.
It may not make logical sense, but it’s a real experience for many people.
A great way to prevent yourself from stress shopping is to relieve the stress more healthily. We touched upon some excellent ideas for stress relief and self-care in the beginning, be sure to check out those resources.
Another way to prevent it is to avoid the situation. Avoid the mall if you know you’ll be tempted to buy things you don’t need. The same is valid with dining out if you tend to stress-eat and opening up that Amazon app if you spend a lot of money shopping online.
Finally, to prevent hemorrhaging money with uncontrolled shopping while allowing yourself some wiggle room, give yourself an allowance. If you must go to the store, only take enough cash to buy what you need, and leave the credit cards home. Set a spending limit on your debit card that you can’t go over.
These protections will help prevent you from overspending.
Families often overspend because they are over-extended. Life is expensive, and sometimes there is just not enough money to pay all the bills. Student loan debt, the rising cost of housing, and inflation eat into budgets, forcing families to rely on credit to survive.
It is an unfortunate reality for millions of people.
Budgeting is your best friend in this situation. Sometimes, there are things you can cut back on to save a few bucks – you can look for ways to save at the grocery store, downsize your house, or cut non-essentials like cable. But sometimes, you’ve cut everything there is to cut and still can’t make ends meet.
Increase Your Income
There are tons of articles on different side hustles all over the internet – check out this post from I Like to Dabble and this one from Arrest Your Debt for some ideas. If you are serious about starting a side hustle and have no idea where to start, check out this course – Launch Your Side Hustle. It helps you through every step, from choosing the right hustle to dealing with taxes.
Spending an extra $97 on a course when you are already hemorrhaging money seems like a terrible idea. But, an investment in yourself is always worthwhile. Read the review before diving in if you aren’t convinced.
I’ve Stopped Hemorrhaging Money, but Now I’m in Debt up to my Eyeballs
An unfortunate side effect to a few months of hemorrhaging money for whatever reason can be tons of debt.
And then it becomes cyclical.
Due to the original issues, you are now bleeding money to pay the credit card bills that stacked up. Then, if something else pops up, you get into even more debt. It’s a vicious cycle of emergencies, debt, repayment, and crises that feels impossible to escape.
We’ve already talked about a few things you can do to break free, such as saving more money or increasing your income.
A last resort option is a debt consolidation loan. Upstart is a fantastic company for consolidation loans. They look past your credit score and see you as an actual person, not just a number. They also have much lower rates than most credit card companies so you will save a ton of money on interest payments. Click here to check them out and see if it’s right for you.
You Can Stop Hemorrhaging Money and Control Your Spending!
The worst thing about hemorrhaging money is feeling out of control. It may not seem like it now, but you can reign in the spending and take charge of it.
The advice offered here will help regardless of your situation. So take a step back and breath. Then, identify the cause and take steps to regain control of your money and destiny. You’ve got this!