‘Tis the season to spend lots of money, but this year, you might be spending more than you plan. It’s all thanks to revenge spending, a term coined by financial advisors to describe the out-of-control splurge spending that follows an economic downturn or extreme frugality.
When it comes to the holidays, it refers to all the extra merry-making you plan on doing this year that you couldn’t in the past. Now that many of the pandemic’s toughest restrictions are gone, you can make up for lost time.
Festive revenge spending can trick you into taking on debt that lingers well into the New Year. Before you put the holidays on credit, check out these tips to bust revenge spending.
1. Know Your Budget
Having a budget can help you spend over the holidays. According to research compiled by YouGov, just 43 percent of Americans have a holiday budget.
Those that do spent $708.03 on the festivities — that’s $300 less than accounting giant KPMG’s projected average spending.
A budget can save you that much and more by helping you understand your priorities this winter. You’ll be able to set an intention to celebrate without wasting money reserved for important bills.
2. Understand How Credit Fits into Your Budget
If your budget reveals you don’t have as much spending power as you thought, don’t turn to an online line of credit or installment loan to buy more. A personal line of credit and installment cash advance have a special place in your finances. They’re available to help in unexpected emergencies.
Let’s say you cut yourself while carving the turkey and need stitches, or your furnace stops working right before a cold snap. If you don’t have emergency savings for these expenses, you may apply for an online line of credit for help.
3. Treat Credit Cards Like They’re Cash
Using a credit card may be the only exception to the rule above. If you plan on shopping online, a credit card offers more consumer and cybersecurity protections than a debit card. It’s often the only way to reserve plane tickets, rental cars, and hotel rooms.
The only problem is a credit card can be a gateway to revenge spending, as you can buy things you can’t afford. You can easily pack on debt with a buy now, pay later attitude.
To avoid going into debt this season, treat the plastic in your wallet like cash. Only ever purchase something you can pay off in full by your next billing statement.
By paying off your card, you won’t carry over a balance that accrues interest and finance charges. These fees can compound drastically, so this trick can wind up helping you save a lot.
4. Manage Your Family’s Expectations
While some people splurge on themselves during the holidays, most people revenge spend on others. Overspending is easy when you’re trying to spoil friends and family, especially young children.
It may seem like you need a mountain of presents and a Michelin-star meal every night to impress, but what truly matters is spending time with people you love.
Recalibrate your priorities this year and focus on experiences rather than purchases. Talk to adult family about what you can afford, and check out these tips about setting expectations with young kids.
No one wins when you revenge spend this holiday. It can only make your financial situation worse than it was before. Follow these tips to spend on budget this holiday season.
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