PEOPLE are complaining about the high prices that we are experiencing nowadays. For example, in the last year, 2022, our average inflation was 5.8 percent, and the BSP Monetary Board forecast for 2023 will likely be around 2 percent to 4 percent inflation.
Inflation has two sides: cost-push inflation is when the demand does not change, but the supply of goods declines. One good example is the rising cost of oil prices due to the ongoing war between Ukraine and Russia. The second type of inflation is the demand-pull inflation which strong demand for products or services can cause.
The effect of the oil prices increasing, the market opening, and the rising in demand from people for things and services like traveling. This led us to this inflation problem despite good economic standing that our country is experiencing.
Revenge spending is the incremental increase in consumer spending after the pandemic due to people spending more to compensate for their lost time. After so many lockdowns and restrictions, many were forced to keep their money. As a result, household savings improved compared to pre-pandemic times. And now as the pandemic slowly comes to a close, people are eager to enjoy their freedom and return to how they would usually live and spend. You can see its effects even in the investment world. Some securities appreciated their value due to an increase in companies’ sales report, leading to a bear market rally.
There is no wrong in spending this year, especially if the wedding you thoroughly planned for was canceled because of the pandemic. Now that people can finally hold an event, you have all the reason to spend for it. But if you are swiping your credit card based on emotions, you are running the risk of falling victim to revenge spending. And the simple way to know if this is happening to you is if you can no longer fund your essential goals like retirement investment.
So, the question is: How can you protect yourself against this revengeful emotion? It may sound cliché, but you can reset your spending habits with the help of some strategies.
Prioritize your needs and goals.
Curbing your desire to spend can be easier if you remind yourself of what is truly important. Revenge spending is an emotion-driven behavior. You can only win through it if you combat it with something more emotional impact, like reminding yourself that you don’t want to rely on anyone to provide you with a decent retirement.
Before clicking add to cart or buy now, ask yourself: Do I need this? How frequently will I use this? Is there a better option than purchasing it?
The best way to handle this is to dedicate a no-question fund, then limit your spending based on the amount of money that fund has.
Force yourself to save.
As Sun Tzu said, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” If temptation is your Achilles heel, forcing yourself to invest is the best way to curb your craving to spend. If you still have some unallocated budget, sign up for an investment account to fund your retirement instead of booking an unplanned trip. It is also good to review all your insurance coverages and know your protection gap, and this is maybe the right time for you to upgrade your life, accident, and health coverage.
The pandemic has not been easy on us, and it is perfectly normal if we are anxious, stressed, or depressed. Know that there is a better way to win this battle than wasting our hard-earned money.
If you want to spend, go ahead if you know that it is part of the plan and that you are following your budget. The idea is to spend your money aligning with what you truly want and value. And to win against this revenge spending is also to cut yourself some slack; after all, money is meant not to be hoarded but to also be enjoyed a bit.
Christopher Cervantes is a Registered Financial Planner of RFP Philippines. He is the author of the best-selling books Financial Planning for the Fast-changing World, Life Begins, and The Seed Money. To learn more about personal financial planning, attend the Chris’ Cervantes webinar: “Financial Planning for the Fast Changing World.” Register on this link: https://cardinalbuoy.com/seminars/
