Summer is the season to soak up the sun and spend time with family, but it can also be a season of overspending, which can lead to financial stress. A study conducted by Experian suggests that vacationers run the risk of coming back from much-needed time off with increased financial stress. Sixty-one percent of those studied admit that they blew their budget on the trip. More than half of a vacation’s expenses end up on a credit card.
That debt can drag people into financial peril. The Center for the New Middle Class found that 32 percent of people surveyed reported that having too much debt and overspending was the biggest factor in falling below “prime” credit status (a score below 700).
Once they have fallen below “prime” status, consumers surveyed pay more attention to the risks of overspending in the summer and plan accordingly. Not yet burned by hard-to-manage debt, prime consumers may be less careful not to overspend during the summer months. Prime consumers spend more than twice as much per person in the household on vacations, childcare costs and family entertainment during the summer compared to non-prime.
So what drives the impulse to overspend? According to Psychology Today, individuals are often influenced by emotion rather than weighing the benefits and drawbacks of a purchase. For example, consumers tend to overspend on special occasions like birthdays or vacations, but do not include them in the budget. Present bias also plays into consumers disregarding long-term interests (like saving for a home) in favor of immediate gratification, like going on a trip.
We are not destined to overspend, regardless of our credit score. A few tips can go a long way to make sure our summers are a relaxing break.
Spending Tips for Summer
- Many non-prime consumers have found that a staycation is a great way to spend time with family, explore their city, and save a few extra dollars.
- School is out for most kids for the summer months. With warm weather and longer days, utilize community resources to minimize entertainment costs for family activities.
- Research shows that grocery bills add up in the summer, so instead of hosting a cookout – potlucks are a great alternative so guests can bring dishes to share.
- Starting a home vegetable garden is not only a fun family activity, it is also an economical way to save money on produce and according to the Wall Street Journal, every $1 spent on green bean yields an average of $75 worth of produce. Starting small with an herb garden or container garden can still make an impact on grocery bills.