PhotoJust like emotions and ice cream, emotions and money often aren’t a great mix. But that doesn’t stop consumers from letting their emotions guide their spending beyond their means.

According to a recent survey by the finance site NerdWallet, 67% of Millennials and 49% of Americans say emotions have caused them to overspend on credit cards. Stress, sadness, and excitement are a few of the emotions that appeared to fuel overspending.

Of those who said emotions cause them to indulge in a little retail therapy, 29% said they’re most likely to overspend due to stress, 22% blamed excitement, and 13% said sadness fueled their spending spree.

“Strong emotions tend to drive us to spend extra, and that’s life,” said Sean McQuay, a credit and banking expert at NerdWallet. To keep your emotions from wreaking havoc on your fiscal fitness, he recommends spending according to your own needs and financial situation.

“Try to keep emotional spending -- whether it’s during times of celebration or stress -- low enough that your finances aren’t significantly impacted. You don’t want today’s emotions to drain your bank account at the expense of your future self,” McQuay said.

Acceptable reasons

Although 86% of consumers surveyed think there are acceptable reasons to go into credit card debt, almost as many (87%) said they would be embarrassed to do so.

A few acceptable reasons for going into debt included: covering emergency purchases (63%), medical expenses (61%), and covering necessary expenses during periods of unemployment (45%).

On the flip side, consumers would be embarrassed to go into debt if it were due to reasons such as overspending on unnecessary purchases (69%), non emergency travel expenses (43%), or cash advances (41%).

Paying off debt

Whether your debt was created by an emotion-fueled trip to the mall or out of necessity, NerdWallet has a few tips for improving your credit card debt situation.

  • Stop increasing your debt. While credit cards may be a great tool for building credit and earning rewards, the interest you pay can make it harder to get on top of debt. So, stop charging.
  • Choose a payoff plan. The “snowball method” of paying off debt entails paying your balances from smallest to largest, while the "high interest plan" involves paying your balances from highest interest rate to lowest interest rate.
  • Find extra money in your budget. It's in your best interest to pay off debt as soon as possible. For this reason, consumers should put any extra money in their budget toward their debt. Create more money in your budget by increasing your income and/or decreasing your expenses and redirecting extra cash toward the card you’re paying off.

McQuay’s golden rule for personal finance: “Don’t keep up with the Joneses -- and don’t judge them either. We each have our own personal finance situation, and it’s surprisingly hard to compare superficially.”


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