Americans have gone too far in spending this summer, study finds
Just as a strict diet can end in a midnight cookie frenzy, drastic spending cuts can erupt into an uncontrollable shopping spree.
So, as the economy recovers, it’s no surprise that Americans, once forced to be more conservative with their finances, feel an “urge to splurge” – spending $ 765 more per month compared to last summer, according to a recent report.
Here are some of the factors behind this huge increase and how to get back on track if you’ve been overdoing it this summer.
These are your finances on FOMO
The MassMutual report, an insurance and financial services company, surveyed 1,750 Americans and found that the majority are experiencing FOMO as their friends and family go wild.
Social media plays a major role – 39% of all respondents said they feel pressured to spend more money when they see others experience it online.
Young Americans are particularly sensitive. Millennials and Gen Z respondents spend an average of $ 1,016 more per month than they did last summer.
Much of this money goes to activities that were abandoned during home support measures earlier in the pandemic:
Travel and vacation
Return to office costs
Excessive spending or back to normal?
The spike in spending is astronomical, but it’s important to remember that the increase is based on a comparison to the summer of 2020, when consumer spending was extremely low.
Could it be that spending has just returned to normal, now that Americans are back have money to spend and places to spend it?
In its own summer report, consulting firm McKinsey agrees that “pent-up consumer demand” has seen spending skyrocket – between 20% and 30% year-over-year.
But it goes further by taking into account the unusually low expenses at the start for the pandemic.
Current spending levels are 4-7% higher than pre-pandemic levels, according to McKinsey, suggesting that revenge spending is really pushing Americans to further excesses.
Did you go a little too far? Here is what to do
Spending more can be problematic. Spending more than what you have is a problem.
The use of revolving credit – like credit cards – jumped 22% year-over-year in June, the largest increase since 1998.
While credit cards are handy tools, interest rates are so high that carrying a balance month-to-month can get you into debt faster than you might think.
So, if spending on revenge is draining your bank accounts or accumulating debt, here are some essential steps to getting your finances back in order:
Get your debt under control. If you have credit card debt, a payday loan, or any other form of high interest debt, a debt consolidation loan may be a good solution. The voucher can help you streamline your payments, lower your interest rates, and even lower your monthly payments.
Build (or rebuild) your emergency fund. Experts suggest setting aside enough money to cover three to six months of expenses. A six-month emergency fund for an average employee would be around $ 31,500 – an intimidating sum, but accessible if you do the right things.
Stop overspending on insurance. Are you sure the company that gave you the best deal years ago is still the cheapest option? Experts suggest shopping for better rates on your auto insurance all six months and using the same strategy for home insurance – otherwise, you could overpay up to $ 2,000 per year.
Find better deals automatically. The internet is a big place with thousands of stores, so it’s hard to feel like you’re getting the best price available. To resolve this issue, download a free browser extension that instantly search for lower prices and coupons before clicking on the payment button.
Use your “spare currency” to invest. Over time, even small investments can pay off. Use an app that round up your daily purchases down to the dollar and investing the difference, you can capitalize on the rising stock market with little effort.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.