The COVID-19 pandemic upended everyone’s financial life. From lost jobs to supply chain disruptions (I have to wait how long for a new couch?), virtually every aspect of the economy was impacted in some way.
As we step cautiously back into the world, many of us have found that our usual spending and saving patterns have been disrupted. That’s why it’s more important than ever to make smart financial decisions, use credit cards wisely and keep a sound budget.
Post-COVID Uncertainty
The pandemic changed everything, and the world continues to feel its effects in our personal finances, in stock markets and in the global economy.
For starters, tens of millions of Americans lost their jobs during the pandemic. Markets dropped to the lowest point in decades in March 2020 and then faced a volatile climb back to a new high—but uncertainty remains. Businesses have opened, closed and opened again. No one really knows what the next year will look like.
While the government stepped in to help countless people, many have struggled to make ends meet as unemployment insurance has been phased out. The pandemic didn’t affect everyone equally, of course, as many people saved more than ever before. All of this adds up to a murky picture of what the recovery will look like and when we’ll truly be back to so-called normal.
What does all this mean for your money? Many who struggled during the pandemic may be ready to reenter the job force or switch jobs. Others are wondering what to do with the money they’ve saved. What unites everyone is this: No matter what your finances look like after COVID, now is the time to get control of your spending to get on solid financial footing.
The Rise of Revenge Spending
Businesses are kicking back into gear, and travel and entertainment options, from trips and sporting events to concerts and movies, are once again on the table. Ways to spend money abound for consumers, and while that’s welcome news, it can also create problems.
Many people are “revenge spending” after being stuck inside for so long. If you’ve been cooped up for over a year, you are likely ready to get out and spend your money on the things you enjoy.
As the country pivots to spending more, some people may be tempted to indulge in things they wouldn’t have bought under normal circumstances. That Cancun trip you’re thinking about booking, for example—that’s revenge spending if it’s something you wouldn’t ordinarily do. This can be bad for your financial health, especially if you’re using credit to finance purchases beyond your budget.
How Can You Avoid the Spending Splurge?
This doesn’t mean you should try to hold back on every purchase. Just don’t overdo it. If you try not to splurge at all, then you might end up revenge spending later on. Think about your overall budget and splurge strategically: one meal out instead of two, or a road trip instead of a vacation to far-flung locales.
Also consider how you spend. Whether at the register or in your web browser, credit cards can be used as a tool to monitor your money and build toward smarter spending. Paying for all your purchases with a credit card, for example, allows you to manage your spending in one place, so you can track each dollar that comes and goes. Plus, paying off your monthly balance will show you the total amount you spent for the month. As a bonus, you’ll be earning rewards, such as cash back, and building credit as you go.
Fortunately, if you developed good saving habits during the COVID era, you’ve already put some money-saving tips into action. Did you save more of your paycheck because you cut your commute down or stopped eating out as often? Good. Think about what other elements of your pandemic budget you can fit into your new post-pandemic life. If you didn’t spend money on travel or entertainment during the pandemic, for example, how can you adjust your post-pandemic budget in those categories to keep saving?
Also look at where you may have spent additional money during the pandemic and adjust those budget line items. Maybe you signed up for a new streaming service (or a few), started having your groceries delivered or indulged by ordering takeout. Will you need those services in the future or could you cut back? Make sure you review your entire budget and realign your spending to your current needs and goals.
William Myers is a financial writer based in Dallas.
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