4 Warning Signs Your Summer Spending Has Gone Too Far -- and How To Course-Correct
Summer is here, and it’s time to enjoy being with friends and family. But extra spending on dining out, vacations and entertainment can add up quickly.
A few simple changes can help prevent summer fun from turning into financial stress. Here are some signs your summer spending may have gone too far, along with what to do about it.
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Overspending During the Summer
Summer often brings vacations, pool parties, amusement park visits and shopping for summer clothes. Unfortunately, not everyone can afford these activities. Spending can easily get out of hand, leading to a pattern of overspending that can damage your savings and credit. Overspending can be triggered by:
Emotions (e.g., buying a new summer outfit to make you feel better)
Outside influencing pressures (e.g., trying to match your neighbor’s expensive vacation)
Fear of missing out (e.g., clearance sales or last-minute discounts)
Impulse purchases (e.g., purchasing a water park ticket after seeing a commercial and also buying a new swimsuit for the occasion)
1. Over Budget
Summer fun can make it easy to lose track of your monthly budget. Because small purchases can add up quickly, you may be spending more than you had intended.
Set aside time to check your monthly budget. Review statements and account balances to help you identify overspending and spot problem areas. This will allow you to make adjustments before spending gets further off track. Using your mobile banking app, set up account alerts to help you track your spending limits.
2. Emergency Fund or Savings Dips
Using your savings or emergency fund to pay for impulse purchases this summer (e.g., dining out with friends or buying a new summer outfit) will lower the balance. This can eventually lead to problems if a real emergency occurs.
Using the 50/30/20 rule, set aside 20% of your paycheck each month for savings and to repay any debt. An emergency fund account should have three to six months of living expenses available.
3. Credit Utilization Spikes
If you’re thinking about taking a summer vacation at the last minute but are short of the full amount needed, you may be tempted to use a credit card. But maxing out your credit card can lead to utilization spikes. Lenders look at your credit utilization percentage to understand how you manage your credit. Having a 30% or higher credit utilization rate lowers your credit score and can lead lenders to believe you may have trouble managing your credit.
Here are some things you can do to lower your credit utilization percentage:
Keep an eye on your credit utilization percentage by tracking your progress at regular intervals.
Lower your credit card balance by paying more than the minimum payment. In turn, this will improve your credit utilization percentage.
Check on increasing your credit limit.
4. Overdrafts
Overdraft fees are a definite sign of overspending and can accumulate if you are not keeping track. If there is not enough money in your account to cover a charge, but your bank pays for it, your bank may issue an overdraft fee. Some banks may charge $30 or more for an overdraft fee and possibly additional fees if the amount owed isn’t repaid in a few days.
Here are some options to reduce overdrafts:
Track your balance continually.
Keep track of when deposits will be available.
Keep track of electronic payment transfers for bills (including amounts and payment dates).
Use your mobile banking app to set up low-balance alerts.
Link your savings account to your checking account so that you have enough money to cover charges. Some banks charge a small transfer fee for this.
Ask about opting out of overdraft coverage on ATM withdrawals and debit cards. If there is not enough money in your account, the charges will be declined.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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