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Avoid Borrowing Blunders This Holiday Season

Learn to spread cheer without maxing out your credit.

Christmas came early this year.

Ready or not, the holiday shopping season is here — and has been for a while.

Retailers could be found rolling out Black Friday deals long before Thanksgiving week, and according to a report by McKinsey & Co., 45% of surveyed U.S. shoppers had begun their holiday shopping by early October.

To some, an earlier Black Friday may have seemed like an invitation to spend more money or accrue more debt; however, shoppers may have also used the early access to holiday cheer as a means to maintain control over their bank account and shop more mindfully this holiday season.

Putting money away — and also planning out holiday expenses in advance — are effective tactics to help mitigate overspending, according to Paul Golden, spokesperson for the National Endowment for Financial Education.

“The holiday spending season shouldn’t come as a budgeting surprise,” Golden says. However, he adds, all the bells and whistles that come along with the holidays, from gifts to wrapping paper, decorations, holiday parties, and more, can lead to the “potential for overspending and strain on your budget.”

Fortunately, implementing tactics like shopping lists and spending limits can help to manage cash flow and prevent overwhelming holiday debt. With that in mind, let’s take a look at how:

  • U.S. shoppers plan to save, spend, borrow, and budget this holiday season
  • Your own plans compare
  • To prevent borrowing blunders as the holidays rev up.

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How taking time off can benefit your mental health

When it comes to using paid time off, many Americans just don’t do it. In part, that’s because of a major cultural narrative that hard work will allow you to reach your goals.

“That narrative has really ground us into this workaholic sort of mentality,” says Dr. Alex Melkumian, LMFT and Psy. D. “It actually became cool to work 24/7, to be available via email all the time.”

But this lifestyle has plenty of drawbacks and may negatively impact your mental health. Taking a vacation is an important way to practice self care, whether you’re planning a long trip abroad or a three-day staycation.

Here’s a look at how taking paid time off can benefit your mental health and actually make you a better employee.

Why your mental health needs a vacation

Even before the pandemic forced people to stay at home, workers weren’t great about taking time off. A 2019 Bankrate survey found that only 38 percent of Americans with paid vacation days planned on using all of them. And according to the U.S. Travel Association, Americans forfeited 236 million vacation days in 2018, which is equivalent to $65.5 billion in lost benefits.

Work and life can be full of daily struggles, and “chronic stress negatively impacts our physical, emotional and mental health,” says Lindsay Bryan-Podvin, LMSW and a financial therapist.

Unfortunately, the negative impacts of stress increased during the coronavirus pandemic, according to the Kaiser Family Foundation. About 4 in 10 adults in the U.S. reported symptoms of anxiety or depression in 2020 and 2021, up from 1 in 10 in 2019.

A vacation may counteract the effects of stress and potentially help improve your mental health. Here’s why.

Vacations engage your senses

When you’re immersed in a different environment, all of your senses are heightened — especially if you’re experiencing a different culture. Engaging your senses generally helps lower your stress, says Wendy Wright, LMFT and financial therapist.

On vacation, “you are constantly engaging and bombarding your five senses, so it allows new thought loops and you get a different perspective,” Wright says. Breaking out of a repetitive mindset may help you cope with stress or a difficult situation in a healthier way.

Vacations may strengthen relationships

Even with Zoom chats and phone calls, the physical distance from others left many feeling disconnected during the pandemic. A vacation provides an opportunity to strengthen the important relationships in your life, whether you’re taking a trip with friends or family members. And as COVID-19 cases are falling and more people are vaccinated, the ability to safely travel with others is growing.

Vacations can increase your creative thinking

If you’re often stuck in a decision-making loop that’s on repeat every day at work, then you’re only using some of your skills. It’s a lot like the quarantine many are experiencing, “which is why it has felt boring and also despairing; it’s so repetitive,” Wright says.

But on vacation, engaging different parts of your brain kick-starts the creative process and helps you “re-enter work with some fresh ideas,” Wright says.

Taking trips increases your adaptability

Adaptable workers are flexible and can adjust to change with a positive mindset, making it a highly desirable trait in any employee or manager. Taking trips can improve that skill because “it gets us out of our norm,” Melkumian says. “You’re being immersed in something completely different, especially if you’re traveling to a place that’s very different from where you usually live.”

For example, visiting a different country may expose you to a new language, culture, transportation system and social environment. Navigating those challenges helps you become more adaptable and can increase your self-esteem.

Reasons you should take your PTO

Workers in the private industry receive an average of 15 paid vacation days after five years of service, according to the Bureau of Labor Statistics. While some companies allow their workers to roll over the accrued PTO, others have a use-it-or-lose-it policy.

“From a financial standpoint, you should take your PTO because otherwise, you aren’t taking advantage of an earned benefit,” Bryan-Podvin says. “It’s just as silly to not take PTO as it is to tell your boss, ‘No thanks, I don’t really want that raise.’”

In addition to the financial reasons to take PTO, there are other reasons it could be a good idea.

Taking PTO may lead to a promotion

Employees often feel they need to work long hours to pull ahead in their careers, especially if they’re just starting out. But that doesn’t help you with efficiency, effectiveness or creativity. Instead, overworking yourself can lead to burnout and seriously drain your productivity.

Vacation helps you avoid burnout because the time away allows you to refresh your mindset and develop problem-solving tools. It also helps you set boundaries and practice self-care at work. In fact, according to a Project: Time Off report, people who use all of their PTO days have a 6.5 percent higher chance of getting a promotion or a pay raise than people who only take a few days off each year.

Taking PTO may heal work anxiety

While it’s not a specific diagnosis, you might experience work anxiety if you’re constantly thinking about work, you’re worried your colleagues dislike you or you’re afraid of losing your job. Taking PTO can give you time away from the workplace — and the people in it — which can help you break out of these thought processes and deal with what’s behind them.

Planning your PTO is rewarding, too

During the pandemic, the monotony hasn’t given us much to look forward to — but planning a trip or a staycation gives you a sense of anticipation and purpose.

“When we anticipate something good happening, we get to live it in our minds again and again,” Bryan-Podvin says. “It also allows us to use our imagination and daydream, letting us tap into the creative side of our brains that don’t often get as much stimulation.”

Using PTO helps you recharge

Some vacations may not reduce stress at all because they involve long flights or too much stimulation. But a vacation is simply any time you break out of your normal routine, and it’s important to find a good balance for yourself. One study in the Journal of Happiness Studies found that you need eight consecutive days to really unplug from work and feel happy. If you don’t have eight days to spare or you just need a quick way to recharge, you could use a day or two of PTO to relax.

“I love a good staycation and believe that exploring where we live like tourists can make us feel more connected to our sense of home and community,” Bryan-Podvin says.

Bottom line

Getting time away from the daily grind is essential to your mental health, which is certainly something that should be prioritized.

It’s a good idea to know how much PTO you have and in what circumstances you could lose it.

If you’re self-employed, Wright suggests putting aside a certain amount of money every week to form your own PTO fund. But if you do work for someone else, Wright recommends talking with your manager about when to use your PTO and how to delegate tasks while you’re gone.

“Remember your priorities,” Melkumian says. “Your family, your friends, your mental well-being, your health. Things like that are more important than sticking it out for your employer.”

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Millennial Money: It’s OK to not buy stuff on Black Friday

It’s that time of year when retailers seem to join forces to plant a message in shoppers’ minds: “Buy Stuff on Black Friday, or You Are a Fool.”

They transmit this message in loud TV commercials, targeted social media ads, and promotional emails you don’t remember subscribing to.

But you are no fool. And you — not retailers — get to decide what to buy and when.

IT’S EASY TO OVERSPEND DURING THE HOLIDAYS

Feeling compelled to spend money right now is normal. Who doesn’t want to be like the advertisements’ grinning models, with an armful of gifts?

“This time of year, there is a lot of pressure to consume happiness — to show your love through products,” says Christine Whelan, a clinical professor in the department of consumer science at the University of Wisconsin-Madison.

Retailers want you to fold under that pressure. They make most of their money around this time, Whelan says, during their “end-of-year push to sell products.”

You may face other pressures, too. “This year we have almost a perfect storm when it comes to spending,” she says. “We have fears of scarcity, we have inflation, and we have this yearning to celebrate in a more normal way than we did last year.”

As that storm brews toss in feelings of guilt. That’s a common emotion around the holidays and can lead to overspending, says Alex Melkumian, a licensed marriage and family therapist and founder of the Financial Psychology Center in Los Angeles.

Say that, once again, you can’t gather with family, or you can’t afford those gifts your kid wants.

Or maybe you don’t feel guilty so much — just bad for any number of reasons related or not to the pandemic and loaded holiday season. It can be easy to spend emotionally, rather than logically, in hopes of feeling better.

Often, Melkumian says: “Instead of feeling uncomfortable, we’d rather just patch it up with a Band-Aid of buying a little something for ourselves.”

MAKE A PLAN AND SET RULES

So, for various reasons, you may be primed to overshop on Black Friday. With that in mind, try to remember that “bargain hunting” can often lead to buying more stuff than you need, says Ryan Sterling, founder of Future You Wealth, a New York-based investment firm. He’s also the author of “You’re Making Other People Rich: Save, Invest, and Spend with Intention.”

Plus, the fact that your favorite store is promoting 40% off doesn’t change the amount in your bank account. So aim to shop with intention, rather than in response to promotions.

Whelan recommends reviewing your finances to determine how much you can spend on holiday shopping. Create a list of gift recipients, too. With this information, you’ll get an idea of how much to spend on each person. (And if you plan to buy yourself something, add your name to the list.)

As you’re planning, set a few rules. Otherwise, it’s too easy to spot something you want and impulsively buy it. You already have one rule to guide you: Stick to the list. Yes, you may see the perfect item on sale for your aunt. But if she isn’t on your list, or if she is and you already bought her something, move along.

Rules that add “speed bumps” between shopping impulses and reactions are also helpful, Sterling says. For example, maybe you step away from potential purchases for at least an hour, if not a day, before deciding whether or not to buy.

Without giving yourself boundaries, you may do exactly what retailers want — see their product and impulsively buy it. They certainly don’t want you to pause first.

GIVE OTHER TYPES OF GIFTS

As you take control of your spending, rethink gift-giving.

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Can your personality affect your finances?

Let’s be real: You may not know—or think about—the psychological factors that contribute to your financial decisions. But if you want to build healthy financial habits and improve your relationship with money, this topic is worth exploring.

“Our personality has a huge impact on our behavior, preferences, and values,” says Alex Melkumian, PsyD, founder of the Financial Psychology Center in Los Angeles, CA. And when it comes to money, he says that each of our personality traits can impact our financial psychology and mindset in different ways.

The “Big Five” personality traits

Your personality exists on a spectrum—that means you don’t have a single personality type or show one personality trait (people are complex, after all). However, scientists have developed a personality model that identifies five traits found in most human beings:

  • Openness to experience
  • Conscientiousness
  • Extroversion (which also includes introversion)
  • Agreeableness
  • Neuroticism

“Every person embodies some portion of all five of these,” says Dr. Melkumian. “They’re neither good nor bad, but each one can have a negative and positive impact on how you deal with money.”

Want to know where you land? You can take a free personality test here or here. Keep reading for a breakdown of how each trait could affect your finances.

1. Openness to experience

Openness to experience ranges from being closed to being open and reflects your creativity and curiosity. It could show up in whether you’re game to try new things or prefer to go the conventional route.

  • If you’re more closed, you might have an easier time focusing on the financial goals you set.
  • If you’re more open, you could be good at coming up with non-traditional ways to earn money.

“Openness can be a driving force behind a lot of financial success,” Dr. Melkumian says. “Creatives [can be] really high in openness, for example.” However, people who are more closed may have an easier time implementing new plans.

2. Conscientiousness

Conscientiousness ranges from spontaneous to conscientious, and it reflects your thoughtfulness, organization, dependability, and grit.

  • If you’re more spontaneous, you might be more likely to take big risks that lead to big rewards.
  • If you’re more conscientious, you may find it easier to create—and stick to—a financial plan.

Conscientious people tend to be dependable and punctual, which can be a positive trait in a money manager, but they may also seek validation from others. “They may worry about what others will think of their financial decisions,” says Dr. Melkumian. “It may prevent them from taking a risk that they should [consider].”

3. Extroversion

Extroversion ranges from introverted to extroverted and reflects your sociability, assertiveness, and how you feed off the energy of others.

  • If you’re more introverted, you may not be as likely to compare yourself to others when making financial decisions.
  • If you’re more extroverted, it could be easier to build a professional network that you can leverage to advance your financial goals.

Some people are also somewhere in the middle (ambiverts), or move from one end of the spectrum to the other. “You need a little bit of both to be the best professional,” says Dr. Melkumian. The extrovert in you can help you connect with others, while the introvert will keep you from being overly concerned about others’ approval or validation.

4. Agreeableness

Agreeableness ranges from hostile to agreeable and reflects your honesty, generosity, and how you care for and trust others.

  • If you’re more hostile, you might have an easier time advocating for yourself and your needs.
  • If you’re more agreeable, you could be good at collaborating and forming trust-filled relationships, which is key if you’re sharing finances with a partner.

One more thing: Agreeableness may also have an impact on your ability to earn money. For example, “You might [be less likely to] demand the top pay for your skillset being more agreeable,” Dr. Melkumian explains. That can in turn affect your financial planning.

5. Neuroticism

Neuroticism ranges from stable to neurotic and reflects your confidence, resilience, self-esteem, and how well you self-regulate your emotions.

  • If you’re more stable, you may be less likely to make rash financial decisions.
  • If you’re more neurotic, your strong emotions could propel you to achieve your financial goals.

“Emotions get a bad rap in the field of personal finance,” says Dr. Melkumian. “As long as we’re able to keep ourselves out of the extreme negative emotions, they can be motivating and helpful.”

So, what can you do next?

Look for ways to leverage your personality to accomplish your financial goals. Luckily, Upwise is for everyone, and it’s designed to help you create positive habits. So while you may not change your personality, you can work toward improving your financial future.

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Rationalization How we trick ourselves into making bad financial choices.

Rationalization How we trick ourselves into making bad financial choices.

Lilian Yoffe

Financial problems we face on a daily basis are multifaceted and do not stem from simply one bad habit or just a lack of knowledge in the financial realm of things. However, one commonality among all is the mere fact that we can be our own biggest enemy when it comes to money behaviour. Poor judgement and lack of acknowledgement tend to be the leading reasons as to why debts become uncontrollable. They stem from our human nature – wanting to rationalize our behaviour in order to indulge in short term satisfaction with the things you like and enjoy without consideration of the long-term problems that it may cause.

Humans are good at thinking of ways to rationalize our spending. We make anything an excuse to spend more, whether it be through celebrating a special occasion or convincing that it is a good deal, overspending is not hard to achieve. Psychologically, this type of behaviour attempts to logically justify behaviour that is usually immoral or deviant.1 Fraud describes this behaviour as part of a self-defence mechanism which is an unconscious attempt to disregard the real reason for this unreasonable behaviour. This explains many irrational and immoral financial behaviours, such as overspending, avoidance, and infidelity. These rationalizations can be about ourselves or can be about others, just anything it takes to allow us to receive that brief gratification.

As described above, rationalization is not completely malicious – it can be used as a tool to avoid unwanted emotional trauma. However, continuous self-deception can lead to many problems, financially and psychologically. Unlike healthy financial habits where money decisions are based on logical thought and reflection of reality, rationalization validates our behaviour that is not in line with our values and beliefs. We convince ourselves that our wants are needs that need to be fulfilled. Especially after a year of isolation and fear, the list of events and celebrations that are due may exceed our ability to maintain financial stability. Whether it be going out to a restaurant with friends, planning a wedding with family, or moving houses, the list keeps going. The danger of rationalization spread far beyond overspending and financial inconsistency. It can be distressing psychologically as it can be used to mask our real issues that are deeper than the rationale but never address it. Labelling these core problems require a change in our mentality and habits, which is no easy task. This can also be attributed as one of the factors as to why we lie to ourselves financially.

Now you must be wondering, why can’t we just start over and never lie to ourselves again to be in a good place financially? While it is ideal, an American financial advisor and entrepreneur Ramit Sethi wirtes, “even if we tried to rationally critique our own spending, we would encounter an almost insurmountable number of psychological barriers that prevent us from honest self-examination.”2 Perfection is not something we should strive for, as it could be more damaging than we think. However, associating guilt, shame, and negative emotions with financial decisions is emotionally draining, leading to vicious cycles of lying and instability.

In order to avoid this dreadful cycle, honestly regarding one’s financial status and emotional wellbeing is an integral part of it.

  1. Know your spendings and savings without sugar coating it
  2. Acknowledge how spending makes you feel

It is quite impossible for us to strictly stick to a budget constantly; however, being truthful to ourselves can help us escape from the trap of self-deception that can transform into being deceived by the power and danger of money.

  1. Rationalization. GoodTherapy.org Therapy Blog. (n.d.). https://www.goodtherapy.org/blog/psychpedia/rationalization.
  2. Melissa. (2012, October 26). How and Why We Rationalize Spending. Free From Broke. https://freefrombroke.com/how-and-why-we-rationalize-spending/.

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Are you ‘revenge spending’? How to avoid the post-pandemic urge to splurge

Are you ‘revenge spending’? How to avoid the post-pandemic urge to splurge

As the world starts to open again, many of us are also opening our wallets — to spend money at restaurants, the movies, gyms — and on new clothes we previously had no place to wear during the pandemic. Some are calling it “revenge spending.”

With the end of the pandemic in sight, it’s only natural that you may be in a celebratory spending mood. After all, it’s been quite some time since we’ve had a chance to splurge on dinner with friends, travel to see relatives or simply enjoy a latte seated in a cafe. But before you go on a spree and blow all of the savings you may have been able to put away over the past year (or rack up debt on a credit card) NBC senior business correspondent Stephanie Ruhle wants you to check yourself before you wreck your budget.

Stephanie Ruhle shares top travel tips for summer vacation 2021

Understanding why we want to spend

The first thing to consider about spending is why we want to do it, said Ruhle.

“There are a couple of factors at play here,” said Ruhle. “Of course restrictions are easing and it makes sense that we would be spending more on resuming everyday things like going to restaurants or the movies.”

On top of that, people who have been able to work and who are doing OK financially are still saving a lot more than they used to, said Ruhle. “The personal savings rate last month was double April 2019 levels. In March it was quadrupled. And a new Creditcards.com survey found that over 40% of American adults are willing to take on debt to treat themselves right now.”

Ruhle said that after such a challenging year, it’s not surprising that people are trying to buy a little bit of happiness right now, and that spending can be a coping mechanism. They key is to recognize your impulse — if you can do that instead of feeling guilty, that will get you a long way toward moving past overspending.

Keep spending under control

It’s natural to want to spend money right now, but there are steps you can take to make sure things don’t get out of hand, said Ruhle.

1. Prioritize your needs. “Think about doing this before you even leave the house,” said Ruhle. “A lot of people’s bodies changed during the pandemic, and you may legitimately need new clothes,” she said. “Make a list of the items you know you want to replace before you go to the mall.”

2. Keep your values front and center. “Money is just an extension of our values,” said Alex Melkumian, Psy.D., a licensed marriage and family therapist and founder of Financial Psychology Center in Los Angeles, California. “It makes our values come to life through buying things or experiences or whatever we value.” Maybe you value connection or experiences or travel. Or maybe you know you enjoy spending at restaurants because it gives you a social connection. Whatever you value, make sure that your spending reflects that.

3. Set a budget. Ruhle said it’s OK to want to spend because you’ve been feeling deprived for the past 14 months. Just set a budget and let yourself do it — within reason.

Stay on track

Ruhle said that one way to keep spending under control — especially if you’re someone who’s tempted to spend online — is to remove your credit card number anywhere you have it saved.

“Try a cash diet,” she said. “Our brains have a different relationship with spending cash versus swiping a credit card.”


MONEY
What does looking ‘professional’ mean now?

MONEY
What does looking ‘professional’ mean now?

Another smart strategy is to put a 24-hour pause on all purchases. “Chances are you may not want or need the item after you’ve had more time to think about it,” Ruhle said.

You can also set a splurge budget, which Ruhle recommends instead of denying yourself. “Let yourself splurge whether it’s five bucks or 500,” she said. “It’s important that you let yourself even a little something freely.”

How to repair the damage

If you’ve overspent by a couple of bucks, or even a couple of hundred, that’s different than blowing thousands and thousands, said Ruhle. “If you can do something to undo it financially like making a return, of course start there.

More importantly, try to identify the underlying issue. “Why did you overspend?” asked Ruhle. “Were you stressed or upset when you were shopping?” Identifying the issue can go a long way to preventing other spending sprees and more importantly, toward forgiving yourself and letting go.

Take it slow

As more social invitations (and opportunities to spend money!) roll in, it can make some of us anxious, especially after so many months of just staying home.

“First take a deep breath,” suggested Ruhle. “Money is a really emotional thing, it can be challenging to deal with these feelings. Give yourself some grace,” she said.

Next, start slowly by considering your values when spending. Consider spending only on experiences with friends versus new stuff, or if you do go shopping, do so with list in hand.

“Despite all the ‘hot girl summer’ hashtags trending right now, you do not need to go out and get a new gym membership and a whole new wardrobe,” said Ruhle. ” You are doing your best and you don’t need that stuff to start getting back to normal life.”