One of the most common things that couples say to me is, “We make a good living but don’t have nearly enough to show for it at the end of the year.” Sometimes it is worse, and the family has accumulated credit card debt to keep afloat. The culprit is not knowing cash inflows and outflows for the family. Without this information, you have no idea if you are living within your means or beyond your means.

Living beyond your means is not uncommon in the U.S; nearly half of all Americans live beyond their means. Many studies indicate that the urge to spend may be more psychological than based on poor financial skills. Psychologists say that consumers see “wealth signals” around them (e.g. new cars, fancy houses, etc.) and this shows power and status. The animal brain then kicks in and tells consumers that they need to be part of the pack and need those things too (for survival). It is better to be part of the pack than left behind, right? While there is nothing rational about this behavior in the modern world, as a financial planner I have seen many people justify expenses that make no sense.

If you want to avoid conspicuous spending and overspending, try these three simple steps:

Keep up your blinders up. I know it sounds ridiculous, but if you keep up your blinders and do not look around you to confirm your social status, you can help avoid the “need” to keep up with the Joneses. Try this: Each year decide as a family what your goals are for that year: family trip, pay down debt, save more, etc. If you start the year with clarity (or do this at any point in the year), you are much more likely to succeed and not waste another year treading water.

Know your cash flow. Determining your cash outflows for the year can be very overwhelming when you look at the sheer volume of transactions between your credit cards and bank accounts. Online services like make this easier since it aggregates all of your accounts in one place so you have a holistic view of your spending. Try this: Sign up for and add the bank accounts and credit cards you use for your spending. Look at the “trends” tab and see how much it says you spent for the last year (or even six months). Compare that to your take-home pay. You want take home pay > your expenses. Or, look at your year-end credit card statements and the change in cash year-over-year in your bank accounts. Add these together and compare to your take-home pay for the year. Again, take home pay should exceed your expenses.

Delay gratification. Access to easy credit, thinking you “need” something that is truly a want, and the desire for instant gratification leads to overspending. Try this: The next time you are about to purchase something that is not critical for your family’s survival (or a “want”), stop yourself and put that purchase on a 48 hour mental hold. If you were planning to put it on credit, verify that you have the cash to pay that debt first and check to see if this purchase is helping you meet the goals you set in #1. If yes, go ahead and make the purchase after 48 hours. If no, walk away and feel proud of yourself for avoiding a spending mistake.

Overspending will eventually catch up with you. Investment accounts will run dry and savings accounts will deplete. It usually takes a crisis to create a change in behavior. If you feel that your family is overspending, avoid this crisis first and take the preventative measures above or meet with a financial planner for help.