9 reasons you overspend

You have a strict budget

Although it seems counterintuitive, a plan to limit your spending can actually lead to overspending.

“Setting a budget changes the decision-making process,” explains Jeff Larson, an assistant professor of marketing at Brigham Young University in Provo, Utah. “You’ve already put a cap on how much to spend and, when faced with a decision, often end up choosing the [item] at the higher end of the cap.”

In a study published in the Journal of Marketing Research, which Larson coauthored, participants who shopped for a new television, car or furniture were more likely to overspend when they established a budget for the purchase. In some cases, shoppers spent 50% more when they had a target price in mind.

Smart move: Larson doesn’t recommend ditching the budget. In his research, shoppers didn’t blatantly disregard their budget; they just spent the max when a less expensive item may have fit the bill. Instead, develop an awareness of the impact of budgeting. “Knowing about the effect may be enough to negate it,” Larson says.