| After more than a year of being cooped up inside due to the pandemic, people have been eagerly awaiting a return to some normalcy.
Now, it's finally starting to feel like something close to normal is within reach, and that means doing things that we were unable to do. So as vaccinations spread wide and the economy starts to reopen, many experts anticipate a phenomenon called "revenge spending."
That means people are looking to return to normal by shopping in a store, traveling, eating out and going to theme parks, concerts or sporting events. Revenge spending is when people make purchases now to make up for all that lost time during the pandemic when so many opportunities for spending were basically put on hold.
I get it. It's certainly tempting to want to go out and celebrate after such an insane year. However, it's important to keep things in check and take control to make sure revenge spending doesn't get out of hand. Don't allow the celebration to result in purchasing a bunch of things you want, but don't actually need.
Let's be honest, this type of spending will have a negative impact on your financial future.
It's key to determine your wants versus you needs. This is basic budgeting. Needs are things such as food, housing, gas and electricity, hot water, transportation and clothing. Wants are those extra things that would be very nice to have but you can still live without. These include going out to dinner, travel, going to a theme park or a sporting event, or splurging on some expensive clothes.
It stands to reason that the opportunity to return to normal means that spending will follow — and in some cases, with a vengeance. However, to avoid being overzealous with revenge spending, it's important to do a self-check and ask yourself if the stuff you bought is something that will add value to your life.
Granted, it may feel good at the moment to buy that expensive jacket or shoes or splurge on an expensive dinner. But, you may want to consider using those funds for something better, like putting some extra money away in your retirement account, building up that emergency savings, funding your kids' 529 college savings or making an extra mortgage payment.
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CNBC's Financial Advisor mid-year Summit will bring together forward-thinking advisors to hear from industry heavyweights about the state of the markets. Hear from Ariel Investments CIO Rupal Bhansali, Omega Advisors CEO Leon Cooperman, Morgan Stanley Vice Chairman of Wealth Management, Carla Harris, FCI CEO Brian Edelman and more. To register: www.cnbcevents.com/fasummit/.
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