The economic recovery from the 2020 pandemic is not complete, but it is progressing. COVID quarantines have mostly been lifted, brick-and-mortar stores are open, and workers are slowly returning to the office. Consumers are spending more with more opportunities to shop. That's healthy for the economy, but not for the individual consumer. 

Ask any financial professional how to pay off debt and they'll recommend spending cuts as a positive first step. That doesn't happen when consumers who endured a year in isolation emerge from their shelters. Euphoria over regaining what seemed lost a few short months ago drives their behaviors. Overspending is a problem. Here's how to avoid it:

Tip #1: Create a budget

Spending without knowing how much you can afford to spend is a recipe for financial disaster. Create a budget by listing all your expenses and income. Subtract the expenses from what you have coming in and that's what you have left over to spend. To increase that spending amount, review your expenses and make cuts where you can.  

Tip #2: Rebuild your emergency fund

Enhanced unemployment helped some folks during the pandemic, but many people had to use their entire emergency fund just to cover basic living expenses. Now that the world is opening back up, focus on rebuilding your savings if you can. Hopefully, we won't have another pandemic any time soon, but you can never be too prepared. Replenish your emergency funds to be ready for whatever the future may hold. 

Tip #3: Cancel shopping site subscriptions

Many consumers opened new accounts with online shopping sites during the pandemic. Amazon made a net income of $21.33 billion in 2020, nearly doubling its previous year's number of $11.6 billion. Other sites showed similar increases. You don't necessarily need those accounts anymore. Cancel subscriptions to any sites you're not currently using.  

Tip #4: Open a spending account

You don't want to tap your emergency account or other savings when you feel like shopping. Open a separate account and budget a certain amount to put in there every week. That's your "play money." You can do whatever you like with it because it's not earmarked for anything else. You'll be able to spend money without guilt or stress. 

Tip #5: Institute 72-hour and 30-day rules

The 72-hour and 30-day rule are basically the same concept with different timeframes. Both suggest waiting a certain number of hours or days before making a purchase. This helps eliminate impulse spending that might lead to buyer's remorse later. That still might happen, but you can comfort yourself with the knowledge that you didn't spend the bill money to buy it.   

Tip #6: Don't apply for store credit cards

Store credit cards come with high interest rates and low credit limits. Applying for one will cause a hard credit inquiry on your credit report, temporarily lowering your FICO score. Even worse, the store will start offering you access to sales and discounts on items you probably don't really need. That will certainly increase your spending.

The bottom line: Don't get carried away

It's easy to get carried away when we come through the other side of a catastrophe. Enjoy it, but don't overindulge. Create a budget, rebuild your savings, cancel any shopping site subscriptions you're not using, and open a spending account so you have some play money. If you do all that and avoid new store credit cards, you should be all right.        

Kevin Flynn 

Kevin is a former fintech coach and financial services professional. When not on the golf course, he can be found traveling with his wife or spending time with their nine wonderful grandchildren and two cats.