In conversations with clients, colleagues and friends, there’s one habit many seem to struggle with: spending money. No matter how much we earn, the amount we spend often impacts more of a person’s future financial success than their income, savings or investment returns. Try as we might, cutting back our spending is never easy. Until now.
The current pandemic has impacted all of us. For more than 40 million Americans, it’s meant the loss of a job and a steady income. For those fortunate enough to have their health and their jobs, nearly everyone I’ve spoken with is spending much less money than they were three months ago.
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Determine a New Monthly Budget
Many people are likely saving $200 month or more from less car maintenance, lower gasoline prices, no parking fees or dry cleaning and less dining out at restaurants. Even eliminating our daily visit to Starbucks or another drive-through restaurant can save $5-$10 daily.
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Use a Short-Term Cash Surplus Wisely
Even if some savings are temporary, it’s the perfect time to sweep extra cash over to a savings account, fund a Health Savings Account, an Individual Retirement Account (IRA), Roth IRA or a 529 college education savings plan for your children or grandchildren. It can also be used to contribute to food banks and other charitable organizations to meet the needs of those most directly impacted by coronavirus.
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Turn That Canceled Vacation into an Investment
If you have a pile of cash tucked away for a major trip that’s been canceled, consider the benefits of investing that money. For example, if a couple had planned to spend $5,000 or more on a romantic getaway to Europe or a family trip to a theme park, they may now be choosing a less costly vacation that makes it easier to adhere to health and safety guidelines.
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Think Twice about a New Car
Some people who had planned to buy a new car may be re-evaluating the need to drive as much once the economy recovers. If working from home is now a permanent option for one or more persons in the household, it may make more sense to buy a used car and save thousands of dollars, or hold off on a purchase for a few more years. Less mileage on your car now means it could run a lot longer.
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Keep Those Good Habits Going
Everyone needs to save for something. Now we all have the opportunity to create a “new normal” and form new spending and savings habits. A few thoughtful moves now can make a big impact for years to come. Take advantage of the forced broken habits and decide for yourself which habits you’ll take with you into the future.
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