More than a year and a half after the Covid-19 pandemic upended life as we know it, a sense of normality is slowly returning to the UK. With the return of freedom, many will undoubtedly be looking to make up for lost time. This could mean splurging on purchases and services. It may even mean splashing out on experiences like holidays, nights out and festivals. This urge to spend on things we’ve been deprived of due to the pandemic is known as ‘revenge spending’.
However, while a little indulgence after many months of restrictions is completely understandable, going overboard can hurt you financially in the long run. Luckily, the experts at thinkmoney have come up with several practical tips to help you avoid excessive ‘revenge spending’ or overfinancing any FOMO (fear of missing out) you may be experiencing.
[top_pitch]
How to avoid revenge spending
There’s no doubt that Covid-19 has had a generally negative impact on many people’s finances. However, those whose jobs or sources of income have remained stable have been able to save more than usual.
In fact, a recent study as reported by thinkmoney found that one in three Brits has an average of £4,500 more in their savings than before the pandemic.
Here are thinkmoney’s top tips for avoiding ‘revenge spending’.
1. Don’t make big purchases immediately
This is a tip that I have personally used on a number of occasions and found to be quite effective.
If you are looking to splash the cash on an expensive item or items, don’t buy them immediately. Instead, write them down in a list and wait a couple of weeks. This will give you time to mull over the purchases and research them further. You may find better options or better deals.
When you come back to the list, you may realise that many of the items are wants rather than needs.
2. Cut out some small expenses to save every month
Cutting down on some of the small extra expenses you have been incurring since the easing of restrictions can save you a few quid a month. For example, eliminating one takeaway coffee and one lunch meal deal per week can result in savings of up to £27 a month according to thinkmoney.
3. Compare 2019 spends to 2021
Comparing your spending before and after the pandemic can help you understand your finances better. Take a look at what you’re spending money on today that you weren’t in 2019. You might come across something you can stop paying for to save money.
4. Re-evaluate your current subscriptions
If you are anything like me, your subscription bills probably went up during the pandemic as you tried to keep yourself entertained while confined indoors. But as things returning to normal, like me, you may be spending less time in front of the box. It’s worth seeing if there are any subscriptions you can cancel.
You can also save money by taking advantage of subscription packages that allow you to combine plans with people in the same household. Both Netflix and Spotify have this option. Check out our other tips on how to save money on streaming services.
5. Look for accounts with ‘jam-jar budgeting’ options
Jam-jar budgeting means splitting your money each month into several ‘jam jars’, each covering a different area of your budget. So you may have jam jars for your bills, your investments and your disposable income.
This approach ensures that you never spend more than you have. It also helps you see exactly where your money is going. And according to thinkmoney, these types of accounts could also help you improve your credit score.
6. Sign up for supermarket loyalty cards
Supermarket loyalty cards are overlooked by many as an inconvenient faff with little in the way of benefit. But by signing up for a loyalty card at your favourite supermarket and shopping there regularly, you stand to make savings of up to £400 a year.
[middle_pitch]
How can I use my extra savings productively?
Rather than splurging or revenge spending, there are other productive ways to make use of your lockdown savings.
First, consider using some of the cash to start or boost an emergency fund. An emergency fund can make a world of difference if you’re faced with unexpected financial challenges. The more you have in the fund, the better.
If you have any debt, you can use some of your lockdown savings to reduce it or pay it off entirely. For instance, overpaying your mortgage can significantly reduce your interest bill over the term of your loan.
Alternatively, you can invest the money in the stock market and possibly grow it. If you don’t have one already, we have reviewed some of the top providers of share dealing accounts in the UK to help you find one that is a good fit.
Although past performance isn’t a reliable indicator of future results, the stock market has historically helped many investors build wealth, particularly over the long term.
However, stocks can be volatile. So, ensure to do your research and develop a long-term strategy to guide your decision-making.
