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10 Tips For Preventing Revenge Spending From Ruining Your Finances

ByTheMost

Feb 6, 2024
10 Tips For Preventing Revenge Spending From Ruining Your Finances10 Tips For Preventing Revenge Spending From Ruining Your Finances

10 Tips For Preventing Revenge Spending From Ruining Your Finances

Consider a moment when you were rejected for a promotion or went through a breakup and felt compelled to spend money on costly electronics or luxury clothes to make yourself feel better. These purchases may briefly improve your mood, but the financial strain they impose can exacerbate the initial disappointment.

The act of making impulsive purchases in response to negative emotions such as stress, grief, or anger is known as revenge spending. It frequently occurs after a relationship ending, job loss, the death of a loved one, or any other emotionally hard scenario.

While vengeance spending may bring immediate relief or distraction from emotional anguish, it can have long-term financial consequences, including debt accumulation and stifling progress toward financial goals. Here are some practical suggestions for avoiding the cycle of revenge spending.

  • Review your budget
  • Set aside a ‘fun fund’
  • Plan travel destinations ahead of time
  • Put spending limits on your tickets
  • Stay in touch with your emotions
  • Limit exposure to digital marketing
  • Find other activities
  • Make a budget
  • Set savings goals
  • Seek support

1. Review your budget

Keeping in mind where you want your money to go and your financial priorities might help you remember which purchases are genuinely important to you. If you don’t already have a record of your previous spending, many online bank accounts now provide advanced expense-tracking capabilities that can help you examine your spending habits and identify areas for improvement.

“It’s always a good idea to review transactions and examine trends in spending habits,” says Katie Horton, CFP, CPA, founder of Financial Cairn in Texas. “Spending shines a light on what priorities are, rather than what we say they are.”

2.  Set aside a ‘fun fund’

While it’s vital to stay within a budget and keep crucial spending in mind, it’s also important to make time for fun and treat yourself.

Horton advocates creating a “fun fund,” which is a stockpile of cash for non-monthly costs.

“Allocate how much of your savings you’d like to spend on each activity or item,” Horton said. “Then, when that incredible trip deal comes along, go for it. Just don’t go above your budget unless you’re willing to give in another spot.”

When it comes time to spend your fun budget on a well-deserved purchase, the goal is to avoid slipping into the trap of vengeance buying. Consider whether the purchase is only a reaction to bad emotions or if it truly provides you fulfillment.

3. Plan travel destinations ahead of time

Speaking of amazing travel offers, expect a tidal surge of incentives to motivate you to pack your bags. Your mailbox, along with all of those listings of last-minute travel offers, may persuade you to spend money on trips you might not have taken otherwise. Instead of waiting for those offers to arrive, consider where you want to travel and how much you are ready to pay to go there right now.

Aim to avoid the error of overspending on the getaway. Consumers’ wallets have been squeezed by inflation, despite a moderating trend. According to a Bankrate survey, more than half (58%) of those who are unlikely to take a holiday claim they cannot afford it.

Booking flights and accommodations ahead of time will not only help you avoid overspending on travel, but it can also bring you better vacation packages and lower pricing.

4. Put spending limits on your tickets

Tickets to entertainment events are a typical source of vengeance spending. The appeal of attending interesting and memorable events, such as concerts, athletic events, or festivals, can lead to rash and excessive expenditure. However, those tickets might be expensive, so it’s critical to set restrictions.

According to Pollstar, the average price for a ticket to one of the top 100 North American tours last year was $111, up more than $20 from 2018. Tickets to see the most popular musicians can cost hundreds of dollars.

Instead of quickly purchasing an expensive ticket, consider more economical alternatives. Look for discounted tickets via pre-sales, group discounts, or smaller-scale events that may be more affordable.

Use ticket apps and websites to check platform rates and look for special deals. Some apps even let you create price alerts, which warn you when ticket costs fall to a more affordable level.

To stay within your ticket budget, narrow down your options. Consider which events are most essential to you, and avoid those that may be more financially destructive than significant in the long term.

5. Stay in touch with your emotions

In addition to developing long-term objectives for the future, it is critical to remember that revenge spending can occur at any time. You’ll need to be disciplined and remind yourself to pause when considering spending.

“If you are tempted to revenge spend, take a moment to check in with your emotions,” said Horton. “You’re most likely trying to fill a need. Maybe you genuinely want to spend time with nice buddies. Instead of going on a weekend trip, plan a girls’ night out. Determine whether there is a cheaper or free alternative that will satisfy the same goal that is driving the vengeance spending.”

Emotional support from those around you may be more important than a specific pricey item. Reach out to friends, family members, or even a counselor for support and direction.

6. Limit exposure to digital marketing

We are continuously assaulted with commercials, and because of highly educated web algorithms, these adverts are frequently tailored to our precise wants and requirements.

Social media is a popular platform for targeted advertising. In fact, according to a Bankrate poll, 49 percent of social media users made an impulse buy on a social networking platform, with over two-thirds (64 percent) regretting their decision.

To minimize this temptation, limit your interaction with advertising wherever possible. Unfollow accounts that constantly tempt you with product placements and unsubscribe from stores that flood your inbox with advertisements.

7. Find other activities

When you strive to avoid emotional spending, consider what other activities will fill the emotional void. Instead of shopping at the mall, you may go for a free walk in the park with your friends. You’ll still enjoy catching up without being tempted to buy whatever is on sale.

8. Make a budget

If you do not already have a budget, it is time to create one.

“A lot of overspenders aren’t using a budget to set parameters for their habits,” says Nishank Khanna, chief marketing officer of Clarify Capital, a small company finance firm. “When you don’t track what you spend or have goals in mind, it can be hard to feel in control of your financial situation.”

With a budget in mind, you’ll have a better understanding of how much money you can afford to spend before your emotions take over.

9. Set savings goals

Beyond creating a budget, establish savings goals based on your principles. The goals you set for your money can range from buying a vacation to creating retirement savings. Because you are linking your emotions to future financial goals, you may find it easier to resist making an emotional purchase right now.

Cameron Burskey, partner and managing director of retirement security at Cornerstone Financial Services, suggests setting these goals somewhere visible, such as a phone lock screen or background, or on a bathroom mirror.

“There are a lot of places you could put your financial goals, as it is important to constantly remind yourself of them,” he said.

10. Seek support

Seeking help from friends or professionals is not a sign of weakness, but rather an active move toward financial stability. Others with similar aims and experiences can offer crucial advice and accountability.

Consider attending local support groups or programs on financial management, budgeting, and reducing emotional spending. These groups, which are often led by financial specialists or counselors, provide a calm environment in which to learn practical solutions and get motivation from others. You might be able to discover free workshops through your state or local government.

If you’re having trouble with emotional spending and money management, seeing a financial advisor can help. These professionals can provide objective advice, assist you in developing a financial plan, and offer continuing support.

What Is Revenge Spending?

The word “revenge spending” refers to the practice of spending more money than usual after a period of restriction or financial hardships, such as the COVID-19 pandemic.

“In 2022, we saw a large spike in what we call ‘ revenge spending.’ This alludes to people spending more money following a difficult moment during the pandemic. They couldn’t travel, buy, or socialize as freely as they had previously, so they felt compelled to compensate by overspending,” says Baruch Silvermann, CEO of The Smart Investor.

The premise is that you are “making up for lost time” with your money by spending it on things like trips, dining out, and other items that were not available for a while.

The trend is so strong that it is one of the primary causes of current inflation.

“This surge in spending is one of the reasons for inflation, as increased consumer demand has driven up prices,” Silverman said.

How Revenge Spending Impacts Financial Wellness

Revenge spending is something you should be aware of; you may be doing it to compensate for missed time by taking more holidays, or you may be increasing your discretionary spending as your income rises.

“People frequently seek retail therapy to feel better about something that did not go as planned or to maintain the high of feeling good when things did go well. Both scenarios are motivated by emotions. Raya Reaves, founder and finance coach at City Girl Savings, believes that spending money provides a ‘high’ that usually wears off the next day.

Revenge spending isn’t all terrible if you manage it properly, but letting it spiral out of control might strain your finances.

According to Bobbi Rebell, a certified financial planner, the founder of Financial Wellness Strategies, and the author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Become Everyday Money Smart,” we tend to level up when times are good but resist adjusting our spending patterns when necessary.

“The consumer who can be aware of the change in circumstances and match their budgets to new realities will be much more likely to stay on track with their short- and long-term financial goals and aspirations,” she said.

Curbing Revenge Spending

“It’s fine to indulge when you can afford it, but it’s more difficult to know when to be more prudent with your spending and take a step back. Cutting back isn’t fun. But it’s also unpleasant to be stressed out because you can’t pay your bills. After all, your spending is out of line with your economic realities,” Rebell explains.

Suppose you see that your discretionary spending has increased and is interfering with your capacity to save for emergencies, prioritize retirement, or accomplish other financial objectives. In that case, it may be time to change your budget.

According to Silverman, the first step in incorporating discretionary and leisure spending into your budget is to establish suitable boundaries and identify specific areas where you tend to overspend. “While leisure spending is important, many people can reduce it by 50% to 70% and still manage,” he said.

It’s also vital to realize that reducing leisure spending does not imply removing joy from your life. There is a balance to be struck, and prioritizing savings can help you achieve long-term financial goals that will offer you satisfaction and stability in the future.

“You can enjoy life on a budget, you just have to do it the right way,” Reaves said.

How can you tell the difference between treating yourself and revenge spending?

There’s nothing wrong with indulging yourself, but Kendall Clayborne, CFP at SoFi, a personal finance business, points out that you should do it carefully, not spend more than you make or jeopardize other goals like retirement savings. On a similar note, Anna N’Jie-Konte, founder of Dare to Dream Financial Planning, points out that juggling financial flow is a red flag.

For example, you may have planned to save a specific amount of money this month but then decided to only save half of it. Another indicator to halt and examine is if you suddenly have a lot of credit card debt, which was not the case previously. Finally, incurring charges based on emotions, or purchasing random products for the thrill of in-person shopping, might deplete your money and land you in debt you cannot afford.

What can you do about revenge spending?

Martinez suggests that you consider why you are adopting extreme methods to satisfy a desire to spend. “There could be psychological or other unhealthy motives behind it, and seeking help may uncover a deeper problem — it’s not always about money,” she said. “The pandemic hasn’t been easy on us, and there is no shame in feeling anxious, stressed, or even depressed — getting help earlier rather than later could prevent you from causing long-term damage.”

Furthermore, Clayborne mentions a few other important methods you can use to get back on track:

  • Seek out cheaper — or even free — activities: FOMO, more than ever, can affect how people spend their money and encourage them to buy goods they cannot afford. That being said, saving money does not need you to forego exciting opportunities. “If you experience peer pressure to spend more than you can afford, consider cheaper or free alternatives that can help you meet the needs you’re attempting to address. For example, you may be seeing trip photos all over Instagram and feeling compelled to go exploring,” she explains. Instead of spending thousands of dollars on a large trip, consider a day excursion that allows you to discover a new location within a few hours of your home.
  • Practice pausing: If you feel compelled to purchase anything unnecessary, remove yourself from the situation and jot down the desired item and price for later reference.
  • Make impulse spending more difficult: “Clayborne proposes erasing your saved credit card information from websites or apps to assist you prevent impulse purchases; the extra work to make a purchase can make you reconsider whether you need or desire the item.
  • Calculate your hourly earnings: The next time you want to splurge, take a moment to assess your hourly wage. According to Clayborne, you may accomplish this by dividing post-tax revenue by the number of hours worked – this will give you a better idea of how many hours you would need to work to cover an item. “For example, if you earn $20 per hour, a spend of $200 would equal 10 hours of employment. A $200 purchase may feel different after you’ve framed it in this way.”
  • Find a budget buddy: Find someone who can hold you accountable and urge you to be more responsible with your money. “Having a budget buddy for shorter-term goals may also help build healthy financial habits that can lead you to tackle larger obstacles down the road,” she said.

Get clear about your values and financial goals. 

N’Jie-Konte observes that there is a lot of shame in the personal finance sector about anything considered frivolous, which regrettably typically involves women (e.g., getting our hair done, nails painted, buying nice clothes, etc.). “The reality is that many of us have absorbed this feeling of shame into our mentality, and sometimes people who are great with their finances are beating themselves up for no good reason.”

She goes on to say that the most important thing is to understand your beliefs, as well as your financial goals and priorities. In other words, perhaps focusing on your emotional and physical well-being is a priority, so you budget more for things like therapy and a gym membership while spending less on clothes and technology. The goal is to spend in line with your values while not meeting your financial goals. After all, your hard-earned money deserves to be spent occasionally.

How do I stop revenge spending?

Use smartphone apps or pre-loaded debit cards to set a budget and limit your discretionary spending. This can help to avoid overspending. Avoid incurring needless debt, particularly credit card bills that you cannot pay off soon. Credit card-fueled revenge spending can have long-term financial consequences.

In Conclusion

Revenge spending can become a bad habit, affecting your financial well-being and worsening distress. Understand your financial priorities and budget so that you can make sound spending decisions. Instead of making impulse purchases, try alternate coping mechanisms like journaling or spending time with loved ones, or consult a counselor to establish healthier strategies.

By TheMost

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