The COVID-19 pandemic and resulting U.S. economic downturn have inspired considerable reflection about our sense of financial security. For those who lost jobs and income, the importance of having some savings to help meet housing costs and bills was highlighted. For everyone, reviewing spending patterns for possible cutbacks seemed prudent since circumstances beyond our control could change our economic fortunes in an instant.
Now that the American economy is slowly re-opening and earnings may be picking up, let’s take stock of what we learned financially from the recent quarantine. Personal consumption changed for a lot of people as many avenues of spending (such as restaurant meals, gyms, personal care services, and travel) were not available. Beyond these routine expenses, we have started to examine the most fundamental parameters of our lives, including where and how we live. In essence, these months of involuntary shifts in behavior nudged us to evaluate our spending priorities.
For instance, many of us now have a better perspective on the relative value between the planning, shopping, cooking, and cleaning that is involved in home-prepared meals vs. meals eaten out of the home. Did you find that you enjoyed the process and learned from the former but missed the ease and socialization of the latter? Perhaps you could combine the best parts of both by inviting guests to your home more often, while still reducing your food and beverage expenses.
Similarly, are you considering a summer road trip to visit relatives or friends in another part of the country rather than flying and staying at a hotel? The financial savings might revive a bygone era and offer a new approach to family communication.
Many of us used some of the time at home during the quarantine to look more carefully at bills and financial statements. We found all sorts of small but irritating expenses that add up to real money over time, such as:
- recurring monthly fees for goods and services that are no longer required, including newsletters that have remained unread for months, sampled skincare products that were not canceled before the trial period ended, etc.
- checking account service fees and ATM withdrawal charges that could be eliminated by changing account formats or banks
- insurance premiums for drivers no longer living at home
We applaud those of you who eliminated needless recurring charges, replaced an expired promotion on telecommunication services, took an online driver safety course to earn an auto insurance discount, or learned to brew good coffee at home to reduce the cost of an expensive habit. The sense of taking control of your finances was palpable.
The financial disruption resulting from the pandemic has triggered a widespread desire to make more deliberate choices about our finances. Big financial decisions — how much income to allocate for housing vs. savings, whether to obtain more education and/or training to improve career prospects, the importance of disability insurance, how to implement a savings and investing discipline — are on people’s minds.
If you want to adopt healthier financial behaviors, start with identifying how you spend your money, aligning your spending with your financial priorities, and improving your financial literacy.