Smart spending is something that will come in handy during this pandemic. You may be wondering, but this is a health crisis? How will it affect our finances?
This health crisis has already caused a lot of damage to our finances. It has successfully paralyzed nations and their economies. The coronavirus has forced people to change their lifestyles dramatically. That change is wreaking havoc to the economy.
Protecting people from the very contagious virus means a lot of businesses will have to close down. Anything that brings people together would have to close. Of course, that means these businesses are not earning revenue. In fact, this has already caused a lot of small businesses to close. Even those who were able to open are burdened with new expenses that are cutting through their smaller profits.
It’s a domino effect of bad scenarios. Every time a business closes, it adds to the unemployment rate. And the household finances of the people affected will feel that.
That’s how this pandemic is causing issues with everyone’s finances. With our source of income compromised or threatened, it’s understandable why smart spending is a must during this time.
Fortunately, it seems like people are responding the right way. 1 out of 10 Americans said that the pandemic brought a positive effect on their household budget. They were forced to stop eating out and hold off major purchases. This caused them to save a huge amount of money! It even reached thousands of dollars on average.
Even if the pandemic is causing a lot of problems, it’s also a chance for us to improve how we spend. You need to take advantage of this so you can develop better financial habits.
3 smart spending guidelines during the pandemic
There are three smart spending guidelines that you can use to improve your habits during the pandemic. You don’t have to wait for the global crisis to get worse. You need to start changing how you spend right now so you can strengthen your personal finances.
So what are the three things that you can do?
If the pandemic is threatening the stability of your finances, you have to make sure that your priorities are clear. Even if your current income is still intact and you are still getting paid, you need to immediately identify what your priorities are.
Start by looking at your budget plan. Look at everything that you are spending on right now. Rank them according to priority.
In this case, the priority would be basic necessities. This includes food, groceries, and utility bills. It’s easy to avoid eating out and entertainment expenses because of the pandemic. But even if the time will come that we’re already allowed to go out, you have to keep your priority expenses in mind. These should be among the least of your priorities.
Whatever your priorities are, that should be your focus.
Make sure that you revisit these priorities because as your life changes, your priorities will also change. This pandemic has a long way to go before it is solved. So stay vigilant so you will not be caught unprepared.
Have spending limits
Smart spending also means putting a limit on what you can spend. This is the best way to keep your household finances under control. Again, this will involve your budget. You will set a specific amount for every expense that you have to pay off. Then you have to stick to this amount. That way, you will never go beyond your income.
While we are speaking about income, it’s also important for you to spend below your means. If you’re earning $5,000 a month, keep your expenses only until $4,000 or $4,500. The extra amount will be used to give your savings or emergency fund a boost. In case the situation that you are in gets worse, you will have enough money to help you get through it.
Avoid the use of credit
Finally, smart spending during the pandemic also means you should avoid the use of credit. If you plan to get an auto loan to buy a car, hold that off for now. Or if you wanted to buy a home, maybe you should put your plans on hold as well. Not unless the interest rate is much lower and you are sure that your income will not be compromised by the pandemic, then go ahead. But if you can pause your plans, do it. You don’t want a huge amount of debt hanging over your head as you try to survive the pandemic.
Don’t worry because this is only temporary. Once things go back to normal, you can continue to use credit – as long as you learn to use it wisely.
But right now, if you can avoid it, make sure to keep using cash for now. That way, you don’t have to worry about additional fees and interest rates.
The benefit of sticking to cash is to help you limit your spending. We all know that it’s easier to be reckless with your spending if you are using your credit card. So stick to your cash for now. When you see your cash reserve being depleted, it’ll be easier to implement smart spending habits.
The edge of smart spenders
The truth is, you should strive to be a smart spender regardless of what’s happening around you. Whether there’s a pandemic or a recession or everything is going well, you have to be wise with your spending all the time.
There are two reasons why you should always implement smart spending habits.
Resilience to crisis
If you are a smart spender, you can survive any crisis. You know that when you are in abundance, you should put aside money for the future. Because you know that things will not always be good. There will come a time when you have to make difficult choices. Or your income will be compromised. When that happens, you will know what to do because you are used to being wise with how you spend your money.
Free from debt
Did you know that 23% of credit cardholders added to their debt because of the pandemic? If you’re a smart spender, this should not happen to you.
Smart spenders are usually free from debt. Or at least, they have full control over it. You know how to use credit wisely and you will not be reckless about it. When you learn how to use your credit card wisely, you’ll never be in a position where debt overcomes your ability to pay it off.