Carmen Reinicke - CNBC
COVID-19 vaccination rates are on the rise, states are lifting their pandemic restrictions, and Americans feel good going out and spending their money after a year and a half using only at home.
"Now we are coming out of a cave, basically, and there are a lot of emotions surrounding this situation," said Susan Greenhalgh, a certified financial advisor who runs Mind Your Money in Providence, Rhode Island.
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Treating yourself well, especially after weathering the coronavirus pandemic, is fine as long as you do so within your budget and comfort zone, Greenhalgh said.
But for those who aren't careful,
the urge to resume normalcy after the pandemic could lead to a hangover in the form of financial debt
in the coming months.
To combat this and keep your budget under control, we explain red flags that financial experts advise you to watch out for when spotting a spending problem and what you can do to fix it.
You are accumulating debts
An early sign that you might have a spending problem is that you are mounting debt, especially with high-interest credit cards.
This is especially concerning if you suddenly find that you can't make a full payment at the end of the month, need to reduce the amount you owe, or can't even pay the minimum amount, according to Jacqueline Schadeck, an Atlanta-based economist.
A person walks past a clothing store at the Willowbrook Mall in Wayne, New Jersey, Monday, July 5, 2021. Angus Mordant / Bloomberg via Getty Images
Of course, credit card balances are likely to rise after a year of not spending much to get out, Greenhalgh said.
"We were getting used to such low levels on credit card bills, and now they have risen considerably," he recalled.
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Having a higher bill in a month is not an immediate cause for concern, but it is something to monitor over the next few credit cycles and consider whether you need to reset your budget, according to the economist.
Your credit score drops suddenly
Another thing to keep in mind that could indicate that you are overspending is a sudden drop in your credit score.
This is because one component of the score is your credit utilization, which is how much you have spent against your total limit.
As you go into debt, your credit utilization will increase and your credit score may decline to reflect that, according to Greenhalgh.
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"If, all of a sudden, you've loaded travel, clothing, and restaurants onto [your credit card] and you're not thinking about it, don't be surprised if your credit score goes down," he said.
You're letting your emotions guide your spending
After a year of not doing many of the things we would like to do, it can be tempting to let our emotions take over and lead you to spend without limits.
This can be especially difficult amid an uneven recovery, where the pandemic was beneficial or neutral for some Americans but very damaging for others.
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"We see some people get into trouble with this because they are spending to be accepted and keep up," explained Adam Blum, psychotherapist and founder of the Center for Gay Therapy.
He added that this has been particularly noted as a problem among gay men.
"When we lose consciousness and don't think about what we're doing, we're more likely to make mistakes that we regret," Blum said.
You've tried to budget or cut back, but you're having trouble
After a pandemic, some things will cost more due to inflation and overloaded supply chains.
If your expenses increase as a result of this, it might be undesirable, but it's not necessarily a problem, according to George Blount, financial advisor and managing partner at nBalance Financial in Cambridge, Massachusetts.
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On the other hand, if your spending has gotten out of control, that's a red flag.
And if you've tried budgeting with a system or product that just isn't working for you, that's cause for concern too.
"You have to use the tools effectively," Bloun advised.
Also, if you make a lot of money but just aren't sure where it's going, that could indicate overspending, according to Schadeck.
The solution? Conscious spending
To solve a spending problem, financial experts recommend carefully monitoring where your money and emotions are going before you buy anything.
"I always encourage people to be aware of their money," Greenhalgh said.
That means watching your expenses for several months in a row.
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Reserve a quiet moment in front of your bank account and credit card statements and really see where the money is going.
Then assess what makes you feel good and what you don't like so much.
This could include comparing expenses to a pre-pandemic budget, identifying any changes, and correcting course if necessary.
Staying connected to what you spend can help you form new habits.
If you still have spending problems or feel like it may be tied to emotions that you are struggling to control,
seeking the help of a therapist or financial therapist can help you resolve those issues
.
You can also do certain exercises, like controlling your emotions before making any purchases, according to Blum.
"Everything we do has an emotional component, and if we do not know what emotions are, it will be a loss and we will be stagnant," he said.
If you wonder why you are making a purchase before swiping your credit card, you may be more aware of the emotional component and address it.
