U.S. consumers spent 8.4% more in February 2022 than they did a year prior, according to data from Morning Consult.
Some experts are labeling this as “revenge spending,” or the act of trying to make up for two years of not being able to go out by spending more than they typically would on recreational activities. People, more or less, are looking to buy happiness, says Nashira Lynton, a certified financial counselor and the CEO of Breaking Cycles.
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“I am hearing a lot from people who are recovering from the pandemic and are in search of all the things that bring them joy,” she says. “They are feeling a part of them that has been suppressed for a long time.”
While not all nonessential spending is bad, too much of it can lead to bigger problems, such as going into debt or depleting your emergency fund. “When it’s all said and done, many are overspending again, which we know causes more financial stress in the long run,” she says.
To avoid these financial stressors, there are some pretty straightforward steps you can take, says Alex Melkumian, a financial psychologist who works with clients who have impulse control and overspending habits.
You can de-link your credit card from your payments method on your phone and laptop. Or you can automate a transfer of money out of your checking account and into a savings account on payday, so it’s out of reach before you have a chance to spend it.
Another effective way to cut down is spending is to use some mental tricks that can “fool” your brain into being more responsible.
1. Make a line item for ‘mandatory splurging’
When Melkumian coaches his clients, he has them create budgets and label line items in nontraditional ways. For those who overspend, a line item that simply states “discretionary spending” or even “fun spending” might still feel restrictive and therefore hard to adhere to. Instead, he has them label a line item “mandatory splurging.”
“We thought ‘mandatory splurging’ is something that sounds really fun and really inviting and motivating,” he says. “Now, even though our clients are saving like they should, or, from their perspective, a lot compared to what they used to save, they are not necessarily anxious or stressed about being able to buy something they want.”
Changing the name of the line items, he’s noticed, can slowly change the behavior. Initially, his clients spend the amount allotted to “mandatory splurge” quickly, but after about three months, many struggle to find a use for it.
“Little by little they have fooled themselves into better thinking, a better mindset, and the behavior then follows,” he says. “Language plays a huge part in how we perceive things.”
2. Don’t use the words ‘needs’ or ‘wants’
Certain words hold negative connotations. Even the word budget triggers the same brain response as the word “diet,” which makes people feel like they are depriving themselves when they create one.
That’s why Saundra Davis, founder and executive director of Sage Financial Solutions, and a financial behavioral specialist, doesn’t use the words “needs” and “wants.” The latter holds judgement, and when you judge yourself for purchasing something, you might deprive yourself of it then overspend later.
Little by little they have fooled themselves into better thinking, a better mindset, and the behavior then follows.
Alex Melkumian
Financial Psychologist
Instead, she says, “recognize that there is a difference between a living expense and a lifestyle expense.” By changing the word “want” to “lifestyle expense,” you are acknowledging there is value in a purchase that improves your life, even if you don’t absolutely need it.
When thinking about making a purchase, ask yourself which category it would fall into. Even within spending categories like “food,” there is a difference between a purchase you need to live, like groceries, and a purchase that improves your life, like a nice dinner out.
3. Consider: What are you saying ‘no’ to if you say ‘yes’ to this purchase?
Budgets can help curb spending, but overspenders often find that their best-laid money plans go out the window once they are in the store or at the restaurant.
So while you’re putting items in your cart, think about what you’re saying “no” to if you say “yes” to this purchase, Davis says.
Let’s says you come across a purse you like, she says. “I can stop and say, ‘Okay, Saundra, you’re buying this purse because it’s pretty,'” she says. “‘You love this color and it gives you a warm, fuzzy feeling to think about putting this purse with one of your new outfits.’ Then I might say, ‘If I buy this purse for $200, what am I saying no to?'”
Then it becomes a trade-off: “I’m saying no to adding $200 to my emergency fund,” says Davis. “I’m saying no to adding $200 to my retirement account. I’m saying no to four meals out this month.”
These sacrifices might be okay with you, but laying them out like that might shift your perspective on whether you still want to buy the purse.
4. Sub in a ‘stress-free’ account for an emergency fund
Having an emergency fund is smart, but contributing to an account whose label insinuates you might have to cope with a crisis can backfire, Melkumian says, because who wants to plan for bad things?
He suggests labeling accounts with phrases that appeal to your positive emotions instead.
“With a lot of our clients, our suggestion is a ‘Sleep Well’ account or a ‘Stress-Free’ account,” he says. “You want to fool you brain into is thinking of these accounts in a different way so you’re not stressed, thinking of an emergency, but you’re thinking about being stress-free or sleeping well.”
The article “Fool Yourself Into Being Good With Money Using 4 Mental Hacks From Doctors and CEOs″ was originally published on Grow (CNBC + Acorns).