Here's a method to Break Free from Revenge Expenditures
Shop 'Til You Drop? Not So Fast!
Let's face it, the current economic climate has us all feeling the pinch. With the Trump administration's tariffs looming, many American households might have to dig deep into their pockets, with estimates suggesting anywhere from $3,800 to $7,800 for an average family. And in times like these, it's natural to want to let loose and indulge - but that can lead to a dangerous spending cycle known as "revenge spending."
Revenge Spending: The Dark Side of Compensation
Just as the name suggests, revenge spending happens when you decide to open up your wallet as a way to "get back" at the hardships you've faced. Whether it's a layoff or a heated trade war, this reckless spending can be thought of as a retaliation to the scarcity mindset. After all, who needs responsible budgeting, right? WRONG!
I've often said that sticking to a budget is a lot like sticking to a diet. And trust me, anyone who's tried to restrict their calories knows that an uncontrollable binge is inevitable. Revenge spending is just like that binge, and you might soon find yourself trapped in a vicious cycle of spending extremes.
Craft a Personally-Prioritized Budget
When it comes to controlling spending, the first thing you need is a budget, and I'm not talking about following the cookie-cutter 50/30/20 rule. Instead, create a budget that aligns with your personal values and goals. Make a list of the things that matter most financially to you, whether that's buying a home, saving for your kid's college fund, or simply living without the constant stress of debt hanging over your head. Next, determine how much you need to set aside each month to reach these goals. Then allocate more resources to high-value categories and reduce spending in areas that don't line up with your core values.
Go Old-School With Cash Stuffing
If you need that extra mental push to stick to your budget, try cash stuffing. Label different envelopes for different spending categories and fill each with a budgeted amount of cash for that month (or pay period). From there, you can only spend money in a certain category from the cash in its designated envelope. Once the envelope is empty, you're done spending for that category for the month. Physical money - it's an effective reminder that every penny counts.
Make a 'To-Buy' List and Stick to It
Another way to maintain control over your spending is to make a list of the items you want to buy before you actually buy them. Take a careful look at your bank statements to inform what items make the cut. By doing this, you'll be able to make more thoughtful decisions about what you truly need, rather than giving in to impulse buys.
Identify Your Spending Triggers
Revenge spending may not feel rational, but it's all too common. Take some time to reflect on your recent spending patterns. What emotions were you experiencing before you made those necessary purchases? When those spending triggers strike, take a step back, think twice, and, if necessary, divert your focus to a more constructive outlet.
Stay Mindful: Indulge Wisely
Just like with a diet, total restriction isn't sustainable or healthy – and the same goes for a budget. Indulging is okay, but it's crucial that you do so deliberately and with intention. Ask yourself, "How do I expect this purchase will make me feel? What do I want it to make me feel? What feelings am I trying to avoid by buying it?" By being mindful and self-aware, you can maintain a healthy relationship with your finances and avoid the pitfalls of revenge spending.
For more on curbing unconscious spending, check out our guide here.
[1] The psychology of revenge spending during and after a pandemic. (2021) American Psychological Association
[2] Revenge spending: Psychological strategies for managing high-risk impulse spending. (2018) Journal of Consumer Research
- To stop excessive spending, try defining your spending habits and identifying the triggers that lead you to overspend, often known as revenge spending.
- Instead of following a generic budget rule, create a personal budget that aligns with your values and financial goals, such as saving for a home or covering your kid's college fund.
- For additional control over your spending, try the old-school method of cash stuffing, where you budget a set amount of cash for each spending category and only spend from the allocated envelopes.
- To prevent impulse buying, make a 'To-Buy' list by reviewing your bank statements and carefully considering what you truly need before making purchases.
- Maintain a healthy relationship with your finances by indulging wisely, being mindful and self-aware, and understanding how each purchase affects your emotions and mental state.
