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The combination of stimulus checks and public health restrictions helped to fuel a surprise uptick in savings early in the pandemic. But with social distancing and masking rules now relaxed in many parts of the country, some consumers are making up for lost time. According to data from the Bureau of Economic Analysis, outlays on things from live entertainment to health club memberships saw double-digit growth in the first few months of 2021.
"Revenge spending," as some economists are calling it, might seem like a natural reaction after many months holed up at home. But in its more extreme forms, it can derail your long-term financial security by turning an opportunity to save into a trail of debt. If you're wondering how to better discipline your spending, here are some considerations that may help you.
Put Yourself on a Budget
Taking an exotic vacation or making a day-long spree at the shopping mall can feel like an emotional salve after months spent largely in quarantine. Unfortunately, the financial harm can last longer than the fleeting enjoyment of a spending spree.
One potential way to stop overspending is putting yourself on a budget. Mobile apps help make it easier than ever to maintain tabs on yourself. They often sync with your bank and credit accounts to provide visibility into your spending habits. Another tactic is to automatically load a set amount each month onto a debit card that you use for all your discretionary expenses. You can still go on a nice trip or dine out once in a while, but you'll be forced to pick and choose what you value most.
Avoid Unnecessary Debt
To stay on track, you likely want to forgo racking up credit card balances that you can't pay off at the end of the billing cycle. A 2019 survey of credit card users by CreditCards.com found that 56% of those carrying a balance have had debt for at least a year. And 38% of respondents with credit card debt said their balances were a barrier to making important purchases.
Revenge spending can be even more dangerous if you need to use plastic in order to fuel your splurges. You can help prevent yourself from falling into that trap by paying cash or using a debit card when you visit the mall or purchase concert tickets.
Automate Your Savings
If you're wondering how to stop spending money unnecessarily, automating the amount you contribute toward a retirement account or emergency fund may help. By preventing your full paycheck from dropping into your checking account, you can help avoid the temptation of using it for wants instead of needs.
While automating your savings can be slightly easier if you have a 401(k)-style account through your employer, you can also set up recurring deductions that go into an individual retirement account (IRA) or a high-yield savings account. You can use a similar approach when it comes to building up your rainy day fund, which you may want to keep separate from your normal checking account.
Find Low-Cost Social Opportunities
A 2020 survey from research project Making Caring Common found that 36% of young adults reported feeling lonely "frequently" or "almost all the time or all the time," up from 25% prior to the coronavirus. Now that social distancing guidelines have started to relax in much of the country, many are feeling a desire to finally reconnect with friends and family members.
But that doesn't necessarily have to mean getting together at a trendy restaurant or taking a joint vacation to a posh resort. To temper revenge spending, you may want to focus on activities that provide relaxation and an opportunity for social connections — without the steep price tag. That could mean heading to a local hiking trail, meeting up for coffee instead of dinner or taking advantage of free events sponsored by your local city or town.
