Credit card debt and impulsive spending are rising. This is why, and what to do about it.
Maybe you walk into Target without a list and let its magic tell you what you need to buy. Maybe you’re scrolling through TikTok, see the latest skincare trend, and immediately head to Amazon to purchase it. Maybe you had a tough day at work so you cope by online shopping.
If you didn’t already account for this spending in your budget — that is, you specifically planned to drop $200 at Target — these would fall under impulse spending.
How much are we spending?
A 2022 poll of 2,000 adults conducted by SlickDeals found 64% increased their impulse spending over the last few years. People averaged $314 monthly. That’s up from $276 in 2021 — a percent change of almost 14%. The number one category for 2022 was clothing. The two years prior food and groceries were the number one impulse purchase.
Total household debt balances hit $16.9 trillion at the end of last year, an increase of $2.75 trillion since before the pandemic, according to a report from the Federal Reserve Bank of New York. Credit card balances alone reached a high of $986 billion.
“Although historically low unemployment has kept consumer’s financial footing generally strong, stubbornly high prices and climbing interest rates may be testing some borrowers’ ability to repay their debts,” said Wilbert van der Klaauw, economic research advisor at the New York Fed, in a release.
Why are we spending so much?
Social media, buy now, pay later programs, and shopping after a few drinks, are also making an impact.
In a survey conducted by Bankrate last year, almost half of social media users said they impulsively bought an item because they saw it on social media. And about 64% wished they hadn’t made the purchase.
A LendingTree report found almost half of consumers only made the purchase because they could finance it through buy now, pay later.
And a survey from SoFi found 53% of adults shopped while drinking.
So what can you do?
Here are eight steps you can take to start controlling your impulsive spending.
You could try the 24-hour rule, where you wait a day before purchasing an item. And for every additional $100 the product costs, increase the time you wait. Or, you could try building a wish list to track the products you want.
Think about how you’ll feel about the product in four weeks.
Write down your financial goals, such as a dream vacation or paying off your debt, and start keeping money in accounts to save for those goals.
Make sure your purchases align with your values.
Avoid buy now, pay later options.
Stick to a budget. You can allot a certain amount of money each month for shopping to rein in spending over that set amount.
If you’re really having a hard time saying no to purchases, you can freeze your credit cards. You can also try only using cash when going out.
Limit your time on social media.