COVID-19: A Once-in-a-Lifetime Chance to Change Our Spending Habits
The coronavirus pandemic has changed everything, including how we spend money. Are you spending less right now? Many people are. Here’s how to make the most of that opportunity.
![](https://cdn.mos.cms.futurecdn.net/XGwt5iaHAdyUfs3z3M4bCh-415-80.jpg)
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.
We know there eventually will be pent-up demand for travel, dining out and other activities. My family is already dreaming about the vacations we will take. However, this forced spending reduction may be a once-in-a-lifetime opportunity to re-evaluate our spending habits, invest more and reshuffle the financial deck. The question now is: Can we sustain a modified spending level once we solve the COVID-19 puzzle and return to a more normal life?
Here are some recommendations on how to make at least some of these spending cuts permanent and bolster your finances:
![Determine a New Monthly Budget](https://cdn.mos.cms.futurecdn.net/w4P49b9Go5XfvnEVeJrfGY-415-80.jpg)
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.
Since working from home the past few months, I’ve been sweeping over to savings the money I would have ordinarily spent on gas to drive to my office and buying lunch out a few times a week. You may also consider paying down your mortgage or other debts with this surplus each month. If you are currently retired and spending less, this is a great opportunity to build up your cash reserves.
Take a few minutes to determine how much less you are spending now, and if there are opportunities to convert any short-term spending reductions into long-term gains. Even a $100 monthly reduction in expenses means an extra $1,200 in your bank each year.
![Use a Short-Term Cash Surplus Wisely](https://cdn.mos.cms.futurecdn.net/28cXDXVnK5Zu6Mkh4k9ddY-415-80.jpg)
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.
On the other hand, you can start some positive habits now and carry them into the future, such as increasing the contribution rate into your 401(k) plan. For example, someone earning $100,000 annually who has been contributing 8% of their income to a 401(k) may be able to bump up that contribution to 10%. The extra $2,000 annual contribution, growing over several years, will likely provide you with a significant increase in your retirement account.
![Turn That Canceled Vacation into an Investment](https://cdn.mos.cms.futurecdn.net/oRWijbAVVNkNJBDz9vuHih-415-80.jpg)
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.
Others may be canceling these trips and staying at home until new infections in their state or county continue to recede. If you have money that you now won’t be spending for at least three years, consider investing it in a balanced portfolio in a brokerage account. If you think you’ll need the money sooner, consider opening a high-yield savings account with an online bank.
![Think Twice about a New Car](https://cdn.mos.cms.futurecdn.net/rTPbXKdsQyatRHWfTSj54m-415-80.jpg)
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.
![Keep Those Good Habits Going](https://cdn.mos.cms.futurecdn.net/GyFSKWUsUkahcv6DS8Fuvm-415-80.jpg)
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.
Written by Josh Monroe, a CERTIFIED FINANCIAL PLANNER™ practitioner and a Chartered Financial Consultant designee who listens actively and plans thoughtfully to help clients achieve their goals. He joined the Brightworth team in 2019 as a Financial Planner. Before Brightworth, Josh spent eight years at a leading insurance and investment firm in a variety of roles, including compliance and supervision. Josh is passionate about financial planning and making complex concepts easy to understand.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Josh Monroe is a CERTIFIED FINANCIAL PLANNER™ practitioner and a Chartered Financial Consultant designee who listens actively and plans thoughtfully to help clients achieve their goals. He joined the CI Brightworth team in 2019 as a Financial Planner. Before CI Brightworth, Josh spent eight years at a leading insurance and investment firm in a variety of roles, including compliance and supervision. Josh is passionate about financial planning and making complex concepts easy to understand.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published