About 117 million adults aged 50 and older in the US are nearing the long-awaited time to spend money after the pandemic.
It is overwhelming, exciting, and confusing. And yes, it is different from the world left behind.
Are the measures you used to take before the pandemic – in terms of spending and savings – still acceptable? What changed in the world of personal finance in the last months since the pandemic gripped the world? If you are an older adult, are there specific steps you should take right now, even as the pandemic fog begins to wear off?
For some workers in their 50s and 70s who kept their jobs, saving money wasn’t necessarily that hard during the pandemic. For these workers, basic pleasures like traveling and eating out became something they couldn’t do – and many also received substantial financial benefits from stimulus payments - making it easier to save.
For others, saving money is still a struggle, particularly those whose income or businesses took a hit or those who lost their jobs. In either case, as the pandemic begins to subside, it’s time to rethink how to spend and save.
Reassess Your Expenses after the Lockdown
Review all your habits during the pandemic. Creating a new behaviour or practice in your life can be a two to eight-month-long process, and COVID-19 spawned new habits for all of us. Whether signing up for subscription services or using food delivery services, most of these habits cost money.
The time is now to identify these behaviours and determine which ones are helpful and worth maintaining and which ones to eliminate.
Avoid returning to bad habits.
Experts say the key question everyone needs to ask now is, “Can I be more responsible with my money after COVID-19?” During the pandemic, many older people limited their trips to the grocery store, and even when they did, they usually kept a list and only bought those items so they could be in and out quickly.
Mostly, this eliminated almost all impulse purchases, they say. They suggest that consumers continue this course after the pandemic – limit trips to the grocery store and only buy things on your list when you go.
If you feel that your money is dwindling without knowing, know that it is incredibly commonplace. These are called ant expenses, and these are small purchases that are unnecessary and made frequently and almost unconsciously. They can be diverse, from buying a cookie or buying clothes on impulse to hiring video or music streaming services that you hardly ever use.
These small amounts of money can represent large amounts in the long run. To identify these expenses, you can carry out the exercise of noting each disbursement for one month.
In this way, you can determine how you spend your money and actions to correct the excess of these consumptions. Remember that cutting small expenses can lead to massive savings.
Refrain from Going on a Spending Spree
Suppose you have financial problems to make ends meet. In that case, you don’t know what you spend your money on, and you can’t face an unforeseen expense. You go into debt to buy consumer goods, usually leaving the checking account in the red. Or you have too many expendable costs, which can only mean one thing: you are living beyond your means.
If confinement has shown us something, it is possible to live spending very little money. Locked up at home and unable to leave, we reduced our expenses drastically while the state of alarm lasted. The money spent in the gym, dining out, drinking coffee at the bar, refueling, or buying clothes was non-existent – does this mean that before the pandemic, we were living beyond our means?
It is very likely yes. Therefore, if we want to adapt our finances to a post-coronavirus world, we must reduce our expenses considerably and increase our savings rate.
Learn to click and buy less. Perhaps the worst spending habit many consumers adopted during the pandemic was buying things online. That’s because people couldn’t go to stores, so online shopping evolved to become the second-best option.
However, in many cases, people buy things that they want but do not need. You push a button, and items arrive at your door a day later. That’s why the advice for customers is to take a “mindful” approach to all online purchases. Before pressing the button, ask yourself if you need it.
We recommend removing the shopping apps from your phone for people who keep shopping for things they don’t need.
Automate Your Savings
If you diversify your sources of income (tip 1) and learn to live below your means (tip 2), your ability to save will improve significantly. Therefore, the third piece of advice we give you is to automate your monthly savings. Doing so will allow you to gather a reasonable sum of money in your checking account.
Most people save what is leftover at the end of the month: spend first and save later. What we suggest is that you do it the other way around: save first and spend later. In some places, they call it pre-savings.
If you save this way, you will not save what you have leftover, but quite the opposite: you will only spend the money that you have left after saving. Putting this way into practice is very easy. You have to follow these steps:
- Decide how much money you want to save each month.
- Ask your bank to create a savings account for you. This account should not have debit or credit cards (so you avoid temptations), and you will use it exclusively to save your savings.
- Order a periodic transfer from your spending account to your savings account the day after collecting your payroll. If you collect it on day 1, the transfer must be made automatically on day 2.
- Spend (wisely) the money you have leftover after saving and redeem the money from your savings account under no circumstances.
It is as simple as this. If you decide to follow these steps, you should be able to automate your savings and prepare your domestic economy for a possible crisis that could turn all your financial plans upside down.
Create Viable Goals
On the one hand, there are the mandatory fixed expenses, those that do not usually vary or do so only from time to time, such as a mortgage, costs of the community of owners, or schools’ fees, among others. This item of spending is challenging to reduce.
However, there are mandatory variable expenses such as basic electricity supplies, water, and telephone, food, or clothing. These, typically, cannot be eliminated, but it is possible to reduce their weight in the budget. For example, you could be changing your eating habits, substituting brand-name products for cheaper white-label ones, postponing some clothing purchase decisions, or accessing second-hand markets, among other options.
Here are some tips of things you can do to spend less:
- Reduce your insurance and bills.
- Minimise your data usage.
- Spend less on clothes.
- Do not use a credit card.
- Compare prices.
- Buy on sale.
- Efficiently use electricity.
- Cancel your subscriptions.
- Use the car less and instead use public transport.
- Do not pay bank fees.
- Do not finance your purchases
Invest and diversify
Airlines, hotels, restaurants, shopping centres, workshops, clothing stores, academies; COVID-19 has affected industries and businesses of all kinds, putting millions of people worldwide into unemployment. Therefore, the first measure of our economic shock plan should be to diversify our sources of income
Diversification is insurance against risk. If we have several uncorrelated sources of income, the probability of something happening in the world that affects all of them equally will be very low.
Let’s see it with an example: Sofia does not want to take risks and has looked for an excellent job as a clerk in a well-known National company. She has a permanent contract and earns 1,400 pounds per month.
On the other hand, Juan has no stable job, which has forced him to look for several temporary jobs. He makes 600 pounds a month for a part-time job in an academy, 400 per month working on his own as a community manager, and 300 a month from his own online business. In total, 1,300 pounds.
Sofia earns more than Juan but has bet everything on a single card. If her company closes, she will be unemployed and will make zero pounds per month. If Juan loses his job as a community manager, he still has two other sources of income to fall back on.
It would help if you also spent on improving yourself. During the pandemic, some people who wanted to advance professionally or make career changes began spending money on education to receive additional certification, higher degrees, or training. The time is not now to stop spending on it; instead, it’s time to increase that spending. As the economy recovers, you will reap the benefits.
Set up an emergency fund and work towards investments. Emergency funds are the backbone of personal solid finance plans. There’s no way to hedge against disaster. Still, with the recommended savings of three to six months in cost of living, you have a cushion to meet your immediate needs in case the unexpected happens (hello, Corona).
Once you’ve paid off your debt and set aside enough for a lousy time fund and short-term goals, it is time to start thinking about long-term investing. It’s riskier, but your money will work harder for you. Note that by the time you are paying into an annuity, you are already an investor. Your future self will be very thankful to you!
Learning to save along these lines post-lockdown will make your future self grateful to your former self. Grateful people are happy people. Being thankful can change your life because it makes you appreciate what you have and not what you don’t have, and giving to others benefits our mental and even physical well-being. If the thought of money makes you uncomfortable, consider using it wisely, such as for a charitable organization or to help someone.
And remember: any coronavirus-related issues you may experience are out of your control and not your fault. Be kind to yourself – better times will come.
Leave a Reply