HOW TO AVOID POSTCOVID SPLURGING, AND HAVE FUN.
Pent-up desires can quickly get out of control
Iknow I am not the only one eagerly anticipating going to a movie, out for dinner or even being able to travel again. More than a year stuck at home, living vicariously through Netflix, has become beyond tiresome.
But the challenge, as Canada reopens, will be to avoid succumbing to the great temptation to overfill our plates with a buffet of previously inaccessible activities and experiences. We need to balance our enjoyment of those newfound freedoms without going off the rails like a kid in a candy shop.
Anyone who’s ever embarked on a new eating regimen knows you need to plan how you’re going to spend your calories. Just like those living within a defined food budget, we need to give some forethought to how we are going to incorporate fun expenses back into our budgets.
Some Canadians were fortunate enough to continue working from home and, as a result, have been able to save money that would normally have been spent on commuting, work clothes and eating out. Indeed, Canadians have increased their net worth by $2 trillion from pre-pandemic levels.
Despite this increased wealth allocation, we still have debts, but thanks to reduced spending, many have managed to reduce their overall debt load and allocate funds towards an emergency reserve. Those who have managed to put away some extra can now justifiably devote some of their savings on that long-awaited vacation or season tickets to their favourite event.
On the flip side are those who have spent the past 16 months struggling financially due to pandemic-imposed reduced income. For these individuals, the reopening of the economy could mean increased income as they return to job sectors previously impacted by various restrictions. This may result in increased spending for commuting to work, as well as daycare and clothing.
Regardless of whether our budgets have a surplus or are just breaking even, the temptation to give into our pentup desires for services we’ve not had access to is the same. The question is how to avoid overspending while relieving our pandemic cabin fever.
Before making significant changes to your spending habits, it’s advisable to first review your budget and ensure that what is being spent is less than what is being earned.
If you’ve never developed a written spending plan, or budget, you’re not alone. The first step is to start by tracking where your money goes using your online banking site, monthly statements or a tracking app such as Mint.
If you find yourself running out of money before the month is over, it’s wise to review what areas you can cut back on to balance your budget. It’s often not the big purchases that cause a shortfall in the budget. It’s the small ones we pay little attention to that can have a cumulative detrimental effect.
For example, take the daily stop for a coffee on the way to work. One would not think that a $2 or $3 purchase makes a difference, but it does. If you spend $3 per day on coffee for 20 working days, that adds up to $60 per month. Packing a lunch
instead of buying that $10 daily special can save $200 per month, and a whopping $2,400 per year. This same expenditure could be used for an annual vacation instead.
It’s all about choices: You can choose to pack your lunch and make coffee at home in order to indulge in other niceties instead.
The next step in building a comprehensive budget is to include disbursements for necessities and savings, as well as fun. We give our children an allowance, so should we assign ourselves money toward some of the fun things we have been forced to give up during COVID-19.
There may be areas of spending in your budget, such as stockpiling groceries, that will no longer be as important and can be reduced as the economy reopens. These savings can be reallocated to provide a dinner out every payday or an occasional spa day.
It’s also recommended to purchase a gift card for your favourite restaurant every
payday in order to give yourself a defined allowance to indulge. By preloading a gift card for your favourite coffee place each payday, you give yourself permission (and a limit) to spend. If you use up all your allowance before your next payday, be prepared to go without until you pay yourself again.
Before you get carried away with all the fun you can have after COVID-19, be sure to devote money to savings. Human nature is such that if we have it, we will spend it. The best way to prevent yourself from running out of money is to set up auto payments for your required living expenses and auto-deposits for savings to coincide with when you get paid.
Once you’ve taken care of all your obligations, then, and only then, should you consider indulging in some discretionary spending. For a big expenditure, such as a trip, if you haven’t already saved for it, try waiting to allow time to save for it.
The best time to start saving for all the post COVID-19 fun was 16 months ago. The second-best time to start is now.