With many parts of the U.S. re-opening, tens of millions are expected to make up for lost time by shelling out for experiences they’ve been missing over the past 15 months.
What Is Revenge Spending?
Revenge spending is the phenomenon of consumers making purchases now to ‘make up for lost time’ during the pandemic, when so many opportunities for spending were curbed because of health restrictions or financial duress.
If you haven’t heard of the term before, think of it like a dam that’s about to burst. All of the water pent up inside is consumer demand. The dam itself is the pandemic, which has been holding back spending. As the end of the pandemic looms near, cracks in the dam are appearing—and growing wider.
How to Control Revenge Spending
It’s tempting to want to celebrate after such a difficult year. But for some, the celebration can take the form of purchasing a surplus of things they want, but don’t necessarily need. This can be classified as emotional spending, which means you’re buying habits are dictated by how you feel. The purpose of each purchase is simply make you "feel" better at that moment. It has also been referred to as "retail therapy."
You may feel this return of the economy is a once-in-a-lifetime event, and it may be. Regardless, it’s important to set a budget for discretionary spending. This will help control your personal spending and limit impulse buys. A sound budget, along with a few other tactics, can prevent a spending-spree hangover that rivals the stress of the pandemic.
This is a part of basic budgeting, so it may be something you’ve heard of before. When figuring out how much you spend in a month, take a look at the things you want vs the things that you need.
While it’s completely OK to buy items or experiences in the "wants" category sometimes—especially now, when we’ve been craving experiences—it’s key to be cautious and take a hard look at the funds you have available right now.
Switch to Cash
If you’re having trouble keeping up with all your spending, it may be time to drop the cards. Credit cards can offer a line of credit far greater than you can actually pay. Debit cards, while less dangerous, still can provide access to an overdraft line that will let you spend more than you have. To solve this, turn off your overdraft feature, or, even better, switch to cash. Take only what you think you’ll need for the day and nothing more.
Minimize Online Shopping
Companies do their best to get you to buy things. It is, after all, how they stay in business. In fact, they utilize a whole host of features to get you to impulse buy. These vary from rewards-program discounts and sales, to product reviews and return policies. While brick-and-mortar stores feature some of the same tools, too, many studies show that online retailers put a heightened focus on impulse purchases. Interactive displays, for example, tend to increase a shopper’s desire to impulse buy.
Rather than browsing digitally, consider traveling to an actual store to shop in person. If you need to shop online, search for the specific item you need and nothing more.
Make Yourself Wait to Make a Purchase
To avoid splurging while shopping, it’s important to do a self-check and ask yourself if the item in front of you is something that will add value. When shopping online for example, it’s sometimes too easy to immediately log onto your favorite website and purchase a new pair of shoes that were just listed. Instead of making a decision and buying those shoes then and there, write the name of the item down. If, in a few days, you’re still dreaming of them, or any item that’s on that list, make the purchase.
Other Financial Goals to Keep in Mind
It may feel good to buy those new shoes, or whatever else you’ve been wanting to splurge on, but if you already have half a dozen others in your closet, your money may be put to better use elsewhere. If you’ve got enough cash for all your needs as well as some discretionary spending, consider using those funds for something bigger. The following are some ideas for alternative uses of that money:
- Saving for a down payment on a home.
- Putting your money in a retirement account, such as a traditional or Roth IRA.
- Investing it in the stock market.