If you're like many Americans, you've been cautious about spending during the pandemic, either because money was tight or because much of life was put on hold. When stay-at-home orders were lifted and businesses opened their doors to the public again earlier this year, many of us ventured out.
The newfound sense of normalcy was exciting, but it was easy to get distracted from your financial goals. Currently, the Delta-driven surge of COVID-19 in the United States is impacting the full reopening of the economy, so it's a good time to pause and consider your own spending moving forward.
What is revenge spending?
People engage in revenge spending when they spend lavishly following a negative event. After going through a frightening and difficult experience, people often want to have fun and forget about the bad times. They may feel that by living life to the max and spending without restraint, they can get revenge for the hardships they recently endured.
Some suggest that the opulence of the Roaring Twenties was a kind of revenge for the 1918 flu pandemic and World War I, although other historians believe the causes were more complex.
In any case, it looks like many people are boosting their spending as the COVID-19 pandemic continues. A recent survey found that Americans are spending an extra $765 a month on average compared to a year ago.
Why is revenge spending a problem?
It's understandable if you start spending more as the economy reopens. You may be returning to your pre-pandemic routine, which likely comes with increased costs for transportation, work attire, lunches out, and other items you might not have needed while sheltering in place. And if you postponed a major event like a wedding or family reunion due to the pandemic, it makes sense to spend money on that when the big day finally arrives.
But you risk falling into the trap of unhealthy revenge spending if you're pulling out a credit card based on emotions. Spending in an attempt to make up for all the disruptions and difficulties of the pandemic can lead you to deplete your savings or take on more debt than you can afford. If you're buying random things just for the thrill of in-person shopping, or if your spending is driven by fear of missing out on post-pandemic life, you probably aren't making smart financial decisions.
How to avoid overspending
Once you're aware of the dangers of excessive spending, you can take steps to avoid it. Follow these tips to rein in revenge spending and stay in control of your finances.
- Stick to a budget. Decide in advance how much you want to spend on categories like food, apparel, and entertainment so you aren't buying things on impulse.
- Look at your pre-pandemic spending. If you have records of your expenses prior to 2020—for example, receipts or data from a budgeting app—you can use them to get some perspective on your current spending habits. See how your spending this month compares with your spending in a typical month before COVID-19. If you're buying a lot more now without a good reason, make a plan to cut back.
- Give yourself a cooling-off period before big purchases. Commit to waiting a week before making significant spending decisions so you have time to consider whether a purchase is the best use of your money.
- Create a wish list. Paste product images onto an idea board or use an app like Pinterest to curate a list of things you want. Working on a wish list can help you remember to consider purchases carefully rather than immediately buying whatever catches your eye.
- Set a limit for splurges. It's okay if you occasionally stray from your budget as long as you keep splurges manageable. For example, you might be able to afford spending $15 on a surprise ice cream outing but not $400 for concert tickets you didn't plan on.
- Choose a long-term savings goal. Having a goal in mind can help you resist the temptation to spend.
For more on personal finance topics
If you have more questions about post-pandemic spending and other personal finance topics that matter to you, visit the Learning Center on TD Bank's website.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular TD Bank product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Want to learn more about Money matters?