As the pandemic eases, many Americans are starting to reopen their wallets. They're spending hundreds to thousands of dollars to feel good. After all, we've been cooped up for more than 12 months, right? It's natural to feel great after several months of lockdown. However, financial experts are raising the alarm against retail therapy. And this is why. Retail therapy is the idea of spending lots of money on material things hoping to feel better. Although this habit might give you an immediate boost, the feeling won't last long and it can destroy your financial wellbeing.
According to a U.S News & World Report, over 30% of Americans engage in retail therapy. Sadly, over 50% of those who do admit they don't have a budget. Experts warn that unless such people find a solution, they risk worsening their financial situation.
So, if you want to feel good, here are five ways to spend that money sparingly and still be happy. But first:
Assess Your Finances Before Indulging in Retail Therapy
Before opening your wallet, take a moment to assess your finances. It can help you see which part needs more attention and where you're doing great.
Take a closer look at your assets. How much do you have in your retirement, savings, checking, and investment accounts? How much of your house do you own?
Without looking at your finances, you will be flying blind. You will make mistakes that can put you in more trouble financially.
Now that you know your financial situation, you may have a budget to spend. If that's the case, you need to spend wisely. And this is how:
Prioritize Experiences Over Material Things
Studies show that people tend to be happier buying experiences than material things with retail therapy. This is because experiences connect to our sense of self more than tangible things. And that's not all.
Buying experiences rather than material things make it difficult to compare with others because they're more unique. Experiences like spending time with family and friends reinforce connections and create an opportunity to learn from others.
Make Some Items a Treat
When you have things all the time, you will get used to them. But if you rarely have them, you will look forward to buying them and feel happier.
In one study, participants who were given chocolate once a week enjoyed it more than those given every day. During the pandemic, you probably stopped buying certain things, like a latte every morning.
Now is not the time to go back to these things. Taking a break has probably helped you save thousands of dollars. So, instead of reintroducing them with retail therapy, why not make them a treat?
It could help you save money, and help you feel happier.
Successful entrepreneurs know the benefit of using money to buy time. It helps them focus on what they love doing, because they will be more productive.
If you're working from home, for instance, spend money to get more time to finish projects. You could hire a cleaning person. This way, you get to make more money, feel great and spend more time with your family.
Fight the Urge to Splurge With Retail Therapy
As mentioned, many people are experiencing freedom after several months of lockdown. And it's very easy to get emotional and channel that energy into shopping for material things.
But before you do, it pays to view your purchases analytically. Ask yourself if you already have what you're buying, how long and often you will be using it, and what the opportunity cost is.
Use apps to track your spending every week. Before buying anything, look at the numbers. Sometimes, having real-time data can help you see dangerous patterns and may help you resist the urge to spend. Good luck!