money habits

Life After Lockdown: Creating a Budget Post-Pandemic

Creating a Budget Post-Pandemic

For the past few weeks, I’ve been teaching a personal finance class at Mills College. The first class covered cash flow and budgeting, so I asked my students to create a budget for homework. To help them get started, I suggested reviewing their recent credit card and bank statements to estimate their discretionary spending habits. One of the students brought up a great point: “I wasn’t spending like I normally do during COVID, so the last 14 months may not be representative of my spending from now on.”

As it turns out, her statement is true for most of us. For example, 64% of Americans say their spending habits have changed since the pandemic started, according to a Bank of America survey of more than 2,500 adults. In addition, a separate Bank of America survey found that 46% of affluent Americans have been getting their financial lives in order during the last year and expect to reach key financial milestones sooner than their parents did. That means many of us not only changed how we spend our money, but we also developed more financial discipline during the pandemic.

Indeed, our spending will likely look different as the world reopens and life returns to normal. Of course, just how different depends on the person. It’s tempting to splurge on the things and experiences we missed most in lockdown (for instance, we finally have a reason to buy new clothes again!). However, I think it would be fantastic if some of us could maintain the money habits we developed when we had fewer options. Creating a budget that reflects those habits can be a great way to do that.

How the Pandemic Changed Our Spending Habits

Life in lockdown forced us to reevaluate many aspects of our daily lives. As our circumstances and priorities changed, so did our spending. Gyms and restaurants closed, and travel was all but nonexistent for the first part of the pandemic. So, where did our money go?

Self Magazine surveyed 1,300 Americans to find out how their spending habits changed during the pandemic. Of the female respondents, 62% said they used time in lockdown to cook more creatively and spent a lot more money on groceries as a result. In addition to our growing grocery budgets while at home, a CIT Bank survey conducted by The Harris Poll found that spending on food delivery was also up 25% during the pandemic. 

However, food wasn’t the only thing we spent more on in lockdown. According to data provided by budgeting app Mint last August, consumer spending on investments, pets, education, and home expenses was up significantly year over year.

While some of these trends may continue, others will naturally return to more normal levels in a post-pandemic world. It may be helpful to keep this in mind and adjust accordingly when creating a budget for the future.

Good Habits We Developed in Lockdown

Despite increased spending in certain categories during the pandemic, more than half of Americans said they spent less and saved more than usual overall, according to the same CIT Bank survey. Thanks to government stimulus and new spending habits, many people were able to save more and pay down debt.

Notably, CRS reported that credit card balances declined about $76 billion in the second quarter of 2020, the largest quarterly decline on record. In addition, data from Experian shows that on average, Americans’ credit scores increased and payment habits improved in 2020.

Yet good habits extended beyond those experiencing financial difficulties before the pandemic. Of more than 2,000 affluent adults (households with investable assets between $100,000 and $1 million) surveyed by Bank of America, 81% said they took the money they’d normally spend on entertainment, travel, and dining and set it aside for savings and emergency funds during the pandemic.

The Pandemic’s Impact on Women

These statistics certainly paint a rosy picture, and many of us have been fortunate enough to come out of the pandemic in similar or better financial shape than we started. Unfortunately, however, many women experienced unprecedented challenges during the pandemic, setting them back even further on their path to retirement.

For example, the U.S. Bureau of Labor Statistics reported women’s unemployment has increased by 2.9% more than unemployment among men since the start of the pandemic. In addition, data from Washington University in St. Louis showed hours worked by mothers fell four to five times as much as hours worked by fathers. Many women had no choice but to leave the workforce to care for aging parents or children. Female participation in the workforce has not been this low since 1988, according to one NPR analysis.

It’s no secret that women have long been at a disadvantage when preparing for retirement. This is because we tend to invest less and hold more cash than men, contributing to our savings shortfall. However, the main driver behind this shortfall is our lower lifetime earnings due to gender pay gaps and caretaking responsibilities—a trend that only worsened amid the pandemic.

Morningstar reports that 55% of all jobs lost in 2020 (2.3 million jobs total) were lost by women. And 32% of women ages 25-44 say they’re not currently working due to childcare demands, compared to 12% of men in the same age group.

If you’re facing any of these challenges yourself, creating a budget for post-pandemic life might be the last thing on your mind. However, closing the retirement savings gap is more critical than ever. Even one small step in the right direction can help you take control of your financial future.

Creating a Budget for Your Future

My suggestion to the student who spoke up in my class was to look back to 2019 as a spending guide. You may find this advice helpful as you’re creating a budget for yourself post-pandemic. However, if you want to continue the good habits you developed during COVID or create new habits to better prepare yourself for the future, be sure to incorporate these changes into your new spending plan. Remember: small, consistent actions over time often lead to big results.

If you’d like to work with a fiduciary financial planner to help you feel better about your money and prepare for the future, please schedule a call to see if we’re a good fit. In addition, you can check out The Happiness Spreadsheet, a fresh, inspiring approach to budgeting that can help you maintain good money habits and develop new ones.

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Women and Money: The Final Taboo

Woman sitting looking at her phone

Woman sitting looking at her phone

As women, we talk to each other about everything from sex to politics, to our personal anti-aging strategies. The bonds we form with our female friends run deep, and no subject is off the table. Well, except for one thing that remains off-limits: money.

When was the last time you discussed your salary, bank account, or investing strategy with your friends? You may think that talking about money is not as exciting as hearing about your single friend’s latest dating adventure, or as stimulating as having a good debate about politics. But, there is something deeper going on – there remains a stigma around money that is hard to shake. Some people think it’s tacky, intrusive, or shallow. Other’s feel deep shame about how they handle their money and avoid thinking about it, let alone talk about it.

Not talking about money doesn’t mean that it’s influence isn’t lurking in the background in almost every social situation we find ourselves in. The social comparison theory states that we are constantly comparing ourselves to others to see how we stack up across a variety of domains including wealth and success, but also attractiveness and intelligence. Even if you don’t realize it, your subconscious brain is doing the tallying up. It’s a deeply cultural issue and hard to shake.

Shame and Embarrassment

I can’t tell you how many times as a financial advisor I’ve heard a client say “ok, this is the part of my finances that I’m really embarrassed about”, or “I find this issue really hard to talk about”. It makes me wonder how many women never get the help they need, or when working with a professional omit important details about their financial situation out of shame or embarrassment.

Women have made great strides towards gender equality and the #MeToo movement has encouraged us to common experiences. The result: we realize we’re not alone, we learn from each other, and hopefully, positive change can happen.

Here is why women should start talking about money: Talking about money can help you. It can give you information and resources that can lead you to better financial decisions.

If you aren’t talking about money, you may not know:

  • How much of a raise to ask for.
  • How to negotiate for the best salary.
  • How to handle financial matters with a spouse.
  • What mistakes to avoid while going through a divorce.
  • Where the best place is to invest your cash.
  • That your shopping habit is out of control.
  • How to pay down credit card or student loan debt.

A study from Cambridge University showed that money habits are formed as early as 7 years old. We develop the idea early on that it’s inappropriate to discuss money in big and small ways. We see our parents hiding discussions about family finances from us, or we’re told it’s rude to ask someone how much their purchases cost. Our family instills in us early on what’s socially acceptable and what’s not – and for women, a large part of our societal narrative is being polite. Unfortunately, talking about money honestly often gets classified as impolite.

The taboo around money is still entrenched in our society, but it’s certainly not helping women. The gender pay gap is still prevalent as ever, and although recent studies have shown that women are starting to ask for salary increases – they get them far less often than their male counterparts.

Being Honest With Ourselves About Our Money

The first step to breaking the money taboo is to have honest conversations with ourselves about money. Digging in and uncovering our long-held money beliefs, good or bad, can help us to better understand in what ways our ambivalence about wealth is holding us back. Self-discovery is never an easy journey, but as soon as we commit to becoming more self-aware when it comes to our money, the sooner we’ll be able to form new, positive wealth habits.

While this practice is important for everyone, it’s especially critical for women. Women have the financial odds stacked against them – they’re combatting the gender pay gap, discrimination in the workplace, having to budget for longer lifespans, and the idea that discussing money isn’t socially acceptable. That’s a lot to cope with! The sooner we’re honest with ourselves about our finances, and open ourselves up to taking an active role in our investing, the sooner we’ll be able to live the life we’ve always imagined for ourselves.

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