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Four Ways to Slow Your Revenge Spending Splurge
Four Ways to Slow Your Revenge Spending Splurge
How do you bounce back after isolating for months to avoid the pandemic? If you’re like much of the U.S., then you probably went on a spending spree.
Last year, as Americans began to move about again following the height of the pandemic, they also used boosted savings rates to participate in ‘revenge spending,’ or buying more items of enjoyment than usual. In the surge of activity, excitement, and new sense of freedom following 2020, people sought to take vacations for the first time in months, they tackled long-wanted home upgrades, or they simply splurged more while going out with friends. On average, people spent $765 more per month by the mid-point of 2021 than they did in 2020, according to a recent survey. That amount rose to over $1,000 a month more for those in the millennial and Gen-Z age groups.
Of course, with all that spending, it can also create issues as the year progresses. If you’re finding that your levels of debt have risen, or that you cannot afford other monthly goals, like retirement planning, then it’s likely time to ease your revenge spending.
Reset your buying habits with the help of these strategies.
Reevaluating needs versus wants
When spending, you’re often weighing between needs and wants. The needs consist of everything that you must have to safely and securely live, such as the costs for rent, food, utilities, a vehicle for commuting, and other everyday items that account for much of your monthly costs.
But when spending gets ahead of you, often more of your money has started to move towards wants, or the things you enjoy doing. While food, for example, may constitute a need, dining at the hot spot in town would count as a want. In the revenge spending trend, people have focused on their wants after months of isolation. This is the bucket where vacations, certain home upgrades, and fun outings would land.
If you find yourself outweighing wants over needs, one way to get back to balance is to reduce spending on your wants.
Cutting back on emotional spending
Much of the splurge spending occurred due to an emotional response to the pandemic. Since COVID-19 brought on a significant amount of anxiety, fear, and loss, a natural outlet for these emotions was to spend. To realign your spending requires reducing the number of emotional purchases.
How then do you do so? One tactic: Practice mindful spending, or the act of being hyper-aware of where your money will go or is going and why. This doesn’t require an act of stoicism, preventing you from ever purchasing something that’s enjoyable. Instead, it seeks to keep you aware of the purchases that bring you joy or fulfill a purpose, and get rid of the ones that simply provide a short-term burst of activity.
To achieve this, look at your spending and outline the purchases that brought you joy and the ones that didn’t. Make sure to continue spending on the joyful buys and avoid the less useful splurges.
Another strategy? Put a barrier between you and the purchase. Say you want a new dress you saw online. Put it in the virtual shopping cart and wait 48 hours before buying. If you really want the dress, then you’ll likely feel the same about it after waiting two days.
Earmarking enough for saving and retirement
You don’t want your spending today to hurt the goals that you have for the future. To ensure your revenge spending doesn’t go too far, earmark the money that you want to allocate to retirement or savings first.
You can even automate this process. Allocate a certain amount to move from your checking account to savings account, or to an individual retirement account (IRA) or Roth IRA, on a set day each month. This provides for your long-term goals before you have a chance to use the funds.
Plus, by ensuring you’re paying your future goals first, you have a clearer sense of what money you can spend today.
How to save for the next splurge
Now that you know how much money you can spend each month, make sure to also incorporate opportunities for that big splurge, whether it’s a vacation or eating at that dream restaurant. You shouldn’t completely avoid this spending (after all, that’s why you’re revenge spending in the first place!).
Instead of taking the expenses away for good, plan ahead. Write down the spending goals you have. This should include the mandatory stuff, like paying your rent and saving for retirement. It also, however, should contain some other wants that you dream about. Now that you know which big splurges mean most to you, then you can save some of those extra funds each month for that purchase.
You may just find, through a little planning, that your revenge spending remains in check while the number of things you do on your wish list climbs.