First indicators of a spending downside and what to do about it

Pedestrians in protective masks carry shopping bags in San Francisco, California on Wednesday, February 17, 2021.

David Paul Morris | Bloomberg | Getty Images

For many Americans, post-pandemic normalcy is exciting.

After more than a year inside and without traveling, entertainment, and more to curb the spread of Covid-19, many people are ready to go out into the world again.

However, that excitement could lead to overspending and a debt hangover in the coming months.

“We’re basically out of a cave now, and there’s a lot of emotion involved,” said Susan Greenhalgh, an accredited financial advisor who runs Mind Your Money LLC in Rhode Island.

Here are some red flags that financial experts say could signal a spending problem.

You pile up debts

An early sign that you might have a problem with spending is that you are going into debt, especially with high-yielding credit cards.

This is especially worrying when you suddenly find yourself unable to make a full payment at the end of the month, or reduce the amount you owe, or even pay the minimum amount, according to Jacqueline Schadeck, a certified financial planner based in Atlanta.

Of course, it’s likely that credit card balances will rise after a year of not spending much on going out, Greenhalgh said. A higher bill in a month is not an immediate cause for concern, but it should be kept in mind for the next few credit cycles and consider whether you need to restore a budget.

“We got used to very low credit card bills every month and now they have gone up significantly,” she said.

While it’s okay to indulge yourself occasionally, the key is to stay within your budget and comfort zone, Greenhalgh said.

Your credit score suddenly goes down

Another thing to look out for that could indicate that you are spending over your funds is if your credit score suddenly goes down.

This is because one component of the score is your credit utilization, which is how much you have spent compared to your overall limit. If your credit utilization goes up, meaning you are in debt, your score will likely go down to reflect that, Greenhalgh said.

“Now if you’ve put travel, clothes and restaurants on it all at once and you don’t think about it, don’t be surprised if your creditworthiness goes down,” she said.

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You let your emotions guide spending

After a year of stopping doing many of the things we’d like to do, it can be tempting to put our emotions in control and spend without limits. This can be especially difficult in the face of an uneven recovery where the pandemic has been beneficial or net neutral for some Americans but very harmful for others.

“You can see that some people get into trouble simply because they use spending as a means of getting accepted and keeping up,” said Adam Blum, a licensed psychotherapist and founder of the Gay Therapy Center. He added that this was perceived as a problem, especially among gay men.

“If we pass out and don’t think about what we’re doing, the more likely we will make mistakes that we regret,” said Blum.

You have tried budgeting or limiting spending but are having problems

Of course, some things will cost more after a pandemic due to inflation and congested supply chains.

If this increases your spending it may be undesirable, but it is not necessarily a problem, said George Blount, financial therapist and managing partner at nBalance Financial in Cambridge, Massachusetts.

On the other hand, if your spending has become uncontrollable, that’s a red flag, he said. And if you’ve tried budgeting with a system or product that just doesn’t work for you, this is also a cause for concern.

“You have to use the tools and you have to use them effectively,” said Blount.

If you’re making a lot of money but aren’t sure where you’re going, this could indicate an overrun, according to Schadeck.

We’re basically coming out of a cave now and there’s a lot of emotion with it

Susan Greenhalgh

Accredited Financial Advisor, Mind Your Money LLC

The solution? Mindful spending

To solve a spending problem, financial experts recommend that you familiarize yourself well with the details of where your money is going and the emotions behind the purchases.

“I always encourage people to watch their money,” said Greenhalgh. That means looking at her expenses for a few months in a row, she said.

Take some rest with your bank account and credit card statements and really see where the money is going, she said. Then assess what you feel good about and what you are not so happy about. This could include comparing spending against a pre-pandemic budget, identifying spending shifts, and making course corrections if necessary.

Linked to what you spend money on can help you develop new habits, she said.

If you are still having problems spending money or feel that it is related to emotions that you cannot control, seeking help from a therapist or financial therapist can help you resolve those problems.

You can also do certain exercises, such as: B. Check in with your emotions before buying, said Blum.

“Everything we do has an emotional component, and if we don’t know what it is, we work kind of at a loss, we are stuck,” he said. By asking yourself why you are making a purchase before you swipe your credit card, you can become more aware of the emotional component and address it.

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