What is it?
Revenge spending is the process of spending money after an event that provokes an emotional response e.g. Covid lockdown. It can happen for a short period of time and can be a huge downfall for those that fall victim to it, especially if they continue spending at that level long-term. It can also have a very negative impact on your financial health and in many instances, when not monitored, lead to overwhelming debt that you don’t even realise how you got to. It’s important to state that this doesn’t demonise spending, plenty of people use spending as a coping mechanism, just like some use food and others use going to the gym. This is because it allows people to release negative emotions in a way that they deem positive. They ‘spend’ their emotions just like some ‘eat’ their emotions and others ‘sweat out’ their emotions.
Over the 12 weeks of the first lockdown leading up to May 28th, we saw sales jump to 81% and one of the reasons behind this excessive spending, post-pandemic for many people was because they felt deprived of the socialising, holidays and work that had been restricted and cancelled over the 18-month period. They take revenge for the missed opportunities by spending at a higher level than they typically would in order to make up for lost time. When an individual doesn’t have any savings or an emergency fund and uses their credit card for revenge spending, it can get out of control. This often can lead to a very stressful and difficult situation with their finances that could have been avoided if people were aware of this behaviour.
What are some triggers?
There are plenty of triggers that can cause the negative cycle of revenge spending. For example, Covid and the multitude of lockdowns (they seemed never-ending right?!😡) were a huge contributing factor and a direct result of people using shopping as a coping mechanism after shielding for what felt like an eternity. Although during the covid lockdowns, a lot of people were saving money by not leaving the house, others spent their time clicking ‘add to basket’ because of the negative emotions and uncertainty the pandemic was invoking. Due to the cabin fever that affected (almost) everyone, individuals felt that they deserved to treat themselves.
How to identify and manage this behaviour?
First off it’s important to remember that this is not about removing all spending. You’ve earned your money and absolutely deserve to buy the things you want. It’s all about conscious purchasing or mindful spending, the act of creating awareness around a purchase before you commit. This can be extremely difficult because of how easy and quickly you can purchase items these days. But below are 3 ways that can help you do this:
- Take time out to create a list of desired items
Giving yourself time to create a list of the items you want to buy ahead of when you may buy them means you’re A) able to and more likely to question if that thing is a need or a want, and B) more likely to stick to the predefined list of items when you do feel the need to spend. While point B doesn’t stop the spending, it does limit the damage somewhat as you’re not buying for the sake of buying, but actually buying something that holds a predetermined value to you.
- Create pots of money that protect you while still giving you freedom
As we said, this isn’t about cutting off all spending, but better controlling it. Features like Pots in Monzo are fantastic for giving you this control by creating pots to which money is earmarked every month such as Savings and Bills. Creating a Shopping pot, in which you put a certain amount in every month with the sole purpose of it being a pool of money you give yourself the freedom and permission to spend safely.
- Implement a new timeout habit that you trigger whenever you get the urge to splurge
The danger with revenge spending is how easily and quickly you can fall into it because your mind is focused entirely on one thing, a dopamine hit - you’re craving the release of dopamine which is what makes you feel good. This is why the term `Retail Therapy` is so commonly known. But it’s important to remember that the dopamine isn’t coming from the new iPhone or that new pair of boots, it’s coming from the anticipation and possibility of a reward or treat.
So what’s a good way to control that? Replace the reward with something more positive for you such as going for a walk in the fresh air or listening to one of your favourite songs. By creating a break between the desire to buy and the action of buying engages your brain to properly assess the purchase before you make it.