What we can learn from our spending habits during the health crisis
Our lives have been radically changed by Covid-19, and this was especially true when stay-at-home measures were in place in the UAE. For the first time in many people’s lives, we were either working from home or on furlough if our companies were temporarily closed. To the detriment of economies around the world, people had far fewer options to spend money.
I have always been a big proponent of monitoring my spending every day. I use a free app called Spending Tracker and the process takes me only about 30 seconds each day. It allows me to know exactly where my money is going.
I started to notice a new phenomenon during the movement restrictions. I was having “no spend days” – days in which I did not spend a single dirham. I was cooking for myself, not using my car and was unable to shop as I used to. As soon as I saw this, I was excited and tried to have as many “no spend days” as possible.
And it was not just me who was not spending. In my home country, the United States, the normal savings rate is about 4 per cent, which is terrible, but that is a topic for another article. However, during the coronavirus-induced restrictions, the savings rate in the US shot up to more than 30 per cent, according to the US Bureau of Economic Analysis. I could not find similar data for the UAE, but imagine it was similar, if not more as there are many people here who come from communities where saving is a much more ingrained habit.
With people spending a lot less money, I think there are lessons to be drawn from this that could benefit our financial lives even when Covid-19 is a distant memory.
One key idea of financial independence is that spending more money does not automatically lead to more happiness. It is important to only spend money on the things that really give you what you need, not just momentary bursts of pleasure during retail therapy sessions that quickly fade and leave you wanting more.
Could the things we did not spend our money on during the movement restrictions be things we could continue to not buy when our lives returned to “normal”? Could we reform our spending habits and be able to save more money and reach our financial goals? I hope so, but only if we examine what we did not spend money on and think about how that changed us.
A few categories that registered a significant decline in spending include brunches, entertainment outside the home, clothes, travel, beauty treatments and certain services such as non-live-in maids. I am sure that if you look at your own life, you can find the areas you were not spending money on as well.
Here are a few key questions to ask yourself to help use that information:
Was I able to get used to not spending money on a favourite experience or item? After a couple of weeks, did I miss it?
Did I learn new skills or reconnect with old skills that allowed me to do something I would usually hire others to do for me?
Was there anything that I stopped doing that made my life better? If you had expensive habits that were harming your body, such as a weekly shisha, did you notice that cutting it out because you did not have access to it actually helped you?
There are many types of spending that do not make our lives better. Sadly, we are usually so accustomed to those actions that we do not even think about their effects or if they are necessary. Covid-19 and the movement restrictions it triggered could be the opportunity we needed to break out of some of our spending habits, but it takes a bit of self-reflection. Don’t waste a crisis, use it to improve your life.