It’s common to at least try to start each new year off on the right financial foot. In January, you probably pledged to spend less day-to-day or to finally open up that IRA to put away money for retirement. And maybe things were going well — until coronavirus swept in and completely changed how we are living and therefore spending.
“Many people had to put a pause on their financial goals and are focusing on necessities,” explains Sara Lundberg of BudgetSavvyDiva.com. You may be feeling the need to stock up at the grocer or drug store so you don’t have to shop as frequently, or home entertainment so you don’t get bored (research from McKinsey confirms this is typical). On the flip side, many of those needed pre-pandemic are no longer in play like gas for the car or tickets to the concert.
So, are we spending more or less? It’s it is expected that many people are spending less due to cut costs of eating out and a decrease in child care payments, says Kristy Archuleta, Ph.D., Associate Professor of Financial Planning, Housing, and Consumer Economics at the University of Georgia, although she acknowledges that it’s hard to generalize since every individual’s current financial situation is different.
Simultaneously, many people are dealing with unexpected changes on the other side of the budget equation. If your income has dropped because of a job loss, furlough or reduction in self-employment income, that could also be wreaking havoc on your savings rate. Bottom line: How do you deal with all of these budgetary changes at once?
If your income is no longer what it was, take a look at that budget you put together back at the start of the year. Eliminate all of the non-essentials and adjust the other categories proportionately (maybe all of that streaming isn’t as necessary as you thought) so you can afford to pay rent while also being sure to have enough to spend on dinner.
If you got a stimulus check and don’t need to use it all immediately, stash it for later. Many people may have enough to cover basic expenses and bills without the additional $1,200 (or more). If you’re one of them, put these funds in an emergency fund for use down the road, just in case things change.
Tax refunds are coming and can serve as a crutch for many Americans. Maybe you were going to put that refund toward a family vacation. Instead, bulk up your emergency savings (you’re not going anywhere right now anyway).
If you were set to go on a vacation during the pandemic that got cancelled, you likely got a refund from the hotel and maybe even the airline. Reallocate those funds to pay for your necessities right now and focus on saving for a trip when the pandemic comes to an end.
The same goes for any cancelled event — concerts, sports games — and for services you’re no longer getting under stay-at-home orders — manicures, hair cuts, and waxing appointments. When you take those out of your budget, you open up funds to spend in other places.
Archuleta reminds us to look for refunds from any prepaid services. You might have already paid for your child’s education through the school year or for summer camp that might not happen or you might have been planning to attend a conference for work. No matter the case, reach out to the company to see if they are refunding tickets. Then, use it to start an emergency fund and pay for your bills.
With Rebecca Cohen