Revenge spending is a new term that describes consumer spending following an unprecedented event.
With the nation in lockdown for a good portion of the last year and a half, and the economy impacted by dips in consumer confidence and uncertainty, consumer spending habits changed.
Many people put off big purchases like cars, vacations, and experiences to prioritize their spending with necessities given the unstable economy. As the states, towns and suburbs open back up for business, consumer spending is one of the key indicators that economists are watching for signs of recovery.
“Revenge spending” happens when ‘pent-up demand’ occurs, creating a boom in spending after life gets back to normal, or our new normal. According to a June Deloitte article, consumer spending trends over the last year have plotted a similar trendline to the vaccination levels and the public’s comfort levels. This has resulted in increased spending on things that go beyond everyday necessities.
Spending Your “Revenge Dollars”
You are probably experiencing that same pent-up demand that most Americans are feeling. Things like vacations, durable goods and recreational services are high on the list of things to buy or do before winter hits in Ohio. While spending on these types of purchases can be good for your mental health, there are a few things to consider before clicking the checkout button.
First things first, make sure you are spending within your means. The one hard lesson the last 18 months has taught us is to keep spending in check with income and create a budget to understand and manage your personal finances. It doesn’t take a pandemic to impact your ability to pay your bills, but it certainly was a wake-up call to many. A job loss, illness or unexpected expense can have the same effect and budgeting your money is the best way to be prepared.
When you create a monthly budget, consider setting aside money for the fun purchases you have planned. By budging this “fun money” for stuff like eating out at restaurants, going to the movies, concerts and shows, you keep your spending in check without overspending or sacrificing on the necessities like food, housing, and utilities.
Finding Disposable Income
This area of your budget, used to fund your fun activities, is called disposable income – or the money left over after your primary bills are paid. One of the fastest ways to free up disposable income is to review your current expenses and reduce your monthly costs – specifically with personal debt. The following tips can help you lower your monthly payments and free up money to do some of the fun things on your list and get back to the activities you enjoy most.
Review your credit card balances
If you have credit cards with high interest rates and balances, consolidating those balances to a card with a lower rate can help free up your income so you’re free to spend your money on the things most important to you. For example, KEMBA Financial Credit Union has a credit card that features 0% interest for 12 months on balance transfers and a low rate for purchases every day as well as cash back. The balance transfers will not only save you money on interest but will also help you pay down your balances faster with one easy monthly payment and get out of debt faster.
Review Your Mortgage Payment
If you haven’t reviewed your current mortgage terms lately, you should. Rates are still very low, and a mortgage refinance at a lower interest rate can help you lower your monthly payment or pay off your home more quickly. Plus, with home prices on the rise in Central Ohio, the value of your home may have increased; therefore you may also be able to reduce your monthly payment by eliminating Private Mortgage Insurance (PMI). KEMBA offers low-interest refinance rates for home mortgages and can help you explore the various refinance options to reduce your monthly payment and meet your needs
Reduce High-Rate Debt
Not only can you get money out of your home with a home equity loan, but you can also refinance your car which may enable you to access cash equity available. While a car loan refinance may lower your payment or term so you can get out of debt faster, both options may enable you to restructure and consolidate higher-rate loans to get out of debt faster.
Likewise, whether you have recently graduated or have been re-paying your student loans for years, a student loan refinance is another way to decrease your monthly payments and free up disposable income. A student loan refinance is like mortgage or auto loan where a lower interest rate resets your monthly payment, putting more money back into your monthly budget.
Find an expert to help you uncover your options for repaying high-rate debts and make the most out of your savings.
Make Saving a Habit
Saving for a rainy day makes uncertain times a little less stressful. After reviewing your expenses, consider stashing some of your income in a savings account or money market. Having cash in savings provides peace of mind and can get you through unexpected events like an auto repair, broken dishwasher or a leaky faucet, and more importantly, having an emergency fund will keep you on track for your revenge spending purchases.
Keep Your Expenses in Check
After spending the time to free up income in your budget, you’ll want to avoid taking on new debt that strains your budget and limits what you can spend on the things you want. As you budget your ‘fun money’, be sure that it is budgeted, not borrowed, or you’ll spend the coming months digging out of that financial hole.
Financial Planning is Hard Work
KEMBA’s mission is to help enrich the financial lives of their members, empowering them to do more with their money. If you’ve been one of the lucky ones who hasn’t been impacted by recent events, now might be a good time to assess any outstanding debt, refinance or consolidate debt while interest rates are low, or consider paying off some of your debt. For those having trouble making ends meet or determining the best way to budget your money, KEMBA is here to help with low rates, financial counseling, tools, and banking products to make managing your money easier. To learn more about what KEMBA has to offer, call our member service team at 614.235.2395, option 4, or visit one of our local branches.