Jamie Feldman, a 35-year-old resident of Brooklyn, N.Y., is currently working on paying off close to $20,000 in credit card debt. She is also one of the hosts of the Debt Heads podcast. Feldman found herself in this situation after losing her job during the COVID-19 pandemic and maxing out a credit card while trying to keep up with her social circle.
Reflecting on her spending habits, Feldman shared, “It was a lot of social commitments, expensive dinners, and events with friends who had higher incomes than me. I found it hard to say no, even when I couldn’t afford it or didn’t want to do it.”
Initially, Feldman viewed her debt as something she could deal with later. However, as time passed, she realized she was overwhelmed by interest charges and minimum payments. Taking a step back, Feldman decided to stop shopping and dining out for one month to assess her budget.
“Surprisingly, it made a significant difference,” she noted. “It was the first time I truly examined my finances, understood where my money was going, what I was spending it on, and how much I was earning.”
Feldman’s experience is not unique, as many individuals use credit cards to maintain a certain lifestyle. However, overspending on credit cards can have serious financial consequences. To gain more insight into the lifestyle purchases that Americans are going into debt for, continue reading.
Bankrate’s take: If money’s tight, it can be tempting to overspend — or even go into debt — to pay for the same things your peers have. But keeping up appearances is rarely worth the cost.
Key insights on going into debt for appearances
- Americans may be going into debt to keep up with the status quo. Increased spending on travel, dining and entertainment — as well as the growing popularity of buy now, pay later services — may point to a habit of living beyond one’s means.
- Americans don’t feel like they’re earning enough money. They’re also feeling the pinch of inflation, and it’s affecting their mental health.
- It’s possible to form new habits and break the habit of debt-driven appearances. Deinfluencing, swapping and budgeting could help you resist the urge to overspend.
Americans are in debt, and here’s what they’re spending it on
More than 2 in 5 (44 percent) credit cardholders carry a balance from month to month, according to Bankrate’s Chasing Rewards in Debt Survey. Despite this, around 2 in 3 (67 percent) of these individuals still actively pursue credit card rewards. Could the desire to maintain a certain standard of living be driving Americans into debt?
Based on data from Bankrate surveys, here are some of the expenses Americans are willing to go into debt for:
- Fun purchases: Over one-third (38 percent) of Americans express a willingness to go into debt for a fun purchase this year, as per Bankrate’s Discretionary Spending Survey. Specifically, 27 percent are ready to incur debt for travel, 14 percent for dining out, and 13 percent for attending live entertainment events.
- Summer travel: More than one-third (36 percent) of individuals planning to travel this summer intend to take on debt to fund their trips, according to Bankrate’s Summer Vacation Survey. Additionally, 62 percent plan to use a credit card to cover at least some of their travel expenses, including those who aim to pay off the card in full and those who anticipate carrying a balance.
- Social media purchases: Nearly half (48 percent) of social media users have made impulsive purchases of products seen on social media, reveals Bankrate’s 2023 Social Media Survey. Furthermore, 20 percent have experienced negative feelings about their financial situation after viewing posts from others on social media, and 9 percent state that social media has adversely impacted their money management habits.
- Buy now, pay later: Around 2 in 5 (39 percent) Americans have utilized at least one buy now, pay later (BNPL) service, according to Bankrate’s Buy Now, Pay Later Survey. Of these users, 29 percent admit to spending more than they should have.
It’s essential to note that 56 percent of Americans define financial success as living comfortably, surpassing the desire to become a millionaire (13 percent) or live debt-free (41 percent), per Bankrate’s Financial Success Survey. However, only 11 percent of individuals with a vision of financial success believe they have already achieved it.
Overspending impacts Americans’ mental health
The surge in credit card debt may signify more than just a desire for material possessions. With high inflation rates and limited purchasing power, the situation is complex.
According to Bankrate’s Money and Mental Health Survey, nearly half (47 percent) of Americans state that money negatively affects their mental well-being, leading to anxiety, stress, sleep disturbances, and depression. Concerns such as inflation, debt (e.g., credit card debt, medical expenses, student loans), and inadequate discretionary spending money contribute to these negative impacts.
Reflecting on her experience, Feldman shared that accruing credit card interest and making minimum payments took a toll on her mental health. She believes that societal expectations and advertising play a role in pushing individuals into debt.
Furthermore, not all debt is detrimental. Certain types of debt, such as investments in a home, business, or education, can enhance one’s net worth.
Keep in mind: There’s a difference between keeping up with the Joneses and simply trying to make ends meet. If you’re struggling to pay for housing, groceries, gas, and other basic needs, consider seeking assistance programs or nonprofit financial counseling.
How to avoid the trap of living beyond your means
If you find yourself overspending on “wants” rather than “needs,” it might be time to reassess your spending habits. Here are some strategies to help you live within your means.
Deinfluencing
The deinfluencing trend has emerged on social media as a counter to influencers. Essentially, deinfluencing involves resisting the urge to purchase products promoted by influencers or brands.
Deinfluencers challenge the notion of must-have expensive items, reminding social media users that these products may not be essential. Engaging with this trend can help you reshape your perception of societal norms. You can follow deinfluencers and explore #deinfluencing or unfollow profiles that perpetuate unrealistic standards to change your perspective on material possessions.
For Feldman, stepping away from social media was a way to deinfluence her spending habits.
Swapping
When Feldman decided to cut back on shopping and dining out, she discovered new ways to socialize with friends.
“It encourages creativity,” she shared. “It’s easy to grab a drink or dine out with friends. It takes more effort to suggest alternative, budget-friendly activities.” Feldman and her friends in New York started organizing potlucks, taking walks, and exploring free or low-cost entertainment options.
As Feldman emphasized, “Your friends value your company, not your spending habits.” You can incorporate swapping into your spending habits by opting for activities like game nights or movie nights instead of costly outings. Swapping can help you develop the habit of spending only when necessary rather than out of habit.