Buzz
With the looming possibility of a recession, we must learn to live with uncertainty. However, that uncertainty often causes anxiety. At the start of the pandemic, many of us cut back on spending to ease our worries. But as time passed, this frugality may have shifted into overcompensation, giving rise to 'revenge spending.' If you’ve gone overboard with spending since the lockdown ended, here are some steps to get your financial habits back in check.
What Does 'Revenge Spending' Mean?
As the term implies, revenge spending happens when you splurge to make up for a period of financial difficulty, whether due to a job loss or a global crisis. As the New York Times describes, this behavior is often seen as a reaction to a scarcity mindset—spending to make up for lost time. It doesn’t make logical sense because it isn’t rational; it’s akin to the binge that follows a strict diet, leading to a vicious cycle of extreme behaviors.
How to Break Free from Revenge Spending
When facing challenges with spending and saving, creating a budget is essential—starting with something like the 50/15/5 rule is a solid approach. However, sticking to this budget can be tough, especially when emotional factors influence your spending behavior. Here are some practical tips to help you stay committed to your budget and financial goals.
Give Cash Stuffing a Try
As we’ve discussed earlier, and as you may have experienced yourself, handling money and parting with it can be emotionally challenging. So, if you need a tangible reminder to stick to your budget, seeing an empty envelope can have a more significant impact than simply checking your online balance.
This is where cash stuffing comes in. Label several physical envelopes and allocate cash for specific expenses. Place the designated amount of money into each envelope for the month (or pay period). The key is that you can only spend from the cash in the envelope for each category—once it’s gone, that’s the limit for the month.
Cash stuffing is effective because it compels you to be more deliberate in allocating money to your envelopes, and more self-disciplined since you can't add more once the envelope is empty.
Always adhere to a pre-made “to-buy” list.
A good way to focus your spending goals is to physically write down everything you wish to purchase before you make the purchase. Refer to your bank statements to guide your official “to-buy list” decisions. Reviewing the list will help you reflect on what you truly need.
It’s okay to treat yourself
Remember, overly restricting yourself is what caused the revenge spending issues initially. Building a healthy financial relationship includes indulging with care. Ask yourself, “How do I want this purchase to make me feel? What emotions do I hope to experience? What emotions am I trying to avoid by buying this?”
You are the only one who can decide what holds true value in your life, whether it's treating yourself to a latte from your favorite coffee shop or saving up for an extravagant vacation each year. Allow yourself to enjoy these little luxuries, especially if they enhance your relationship with money.
For further insights, explore how you can reduce your unconscious spending here.
