It might not come to you as a big surprise but spending is down for American consumers. A big reason for this is the fact that the health crisis affected the economy. Businesses had to shut down, several industries had to adapt, and lenders needed to put in stricter regulations to manage risk. All these contribute to the fact that people are spending less than before.
Spending is down
As to be expected, people will spend less now than before. Most of the reasons behind this change in spending behavior can be traced back to the pandemic. To help you understand this shift in spending, here are some of
Choosing to spend less
One of the biggest reasons why spending is down is because people choose to hold on to their money. Regardless of the amount they have saved up, people will be cautious and delay spending money unless necessary. They become more effective in trying to discern their needs from their wants. In turn, this gives them the chance to keep their funds secure for a longer period of time.
Some people are choosing to sit back and observe. They want to see how the economy will perform with the health crisis still spreading. People are trying to feel their way how their job will also fare. Even when it comes to expenses, a lot of consumers are holding back trying to hold on to their cash as long as they possibly can.
Less money to spend
Spending is down as well simply because a lot of people lost their jobs. CNN shares that there has been an increase in first-time unemployment benefits again compared to the past few weeks. This simply means that people are struggling with job cuts happening left and right. As a result, money becomes tight as they make do with a limited budget.
As most companies now ask their employees to work from home, there are still a lot of struggling businesses. This means people are working only a few days a week, put on furlough, or worse, let go. It only means that spending less is because people have less than before. It is tough to maintain the same lifestyle and spending pattern as before when your income is impacted by the pandemic.
Card companies are charging off and lowering credit limits
You might be surprised but one of the reasons why spending is down is that consumers are using their credit cards less. It is easy to think that the go-to for a lot of people would be their credit cards. And this is true especially for those who have to make ends meet. But for most, their credit card lenders are also putting procedures in place that could impact the way people use their cards.
At this time, there are card companies who have taken the initiative and made sure that their borrowers are able to get some breathing room with their payments. This means a flexible payment program and even waiving some interest and late fees. As this helps borrowers, this also prevents defaulting on payments. When this happens, lenders lose a lot more which can lead to stricter lending procedures.
How to get ahead when spending is down
The present situation leads to lower spending but you can actually use this time to get ahead. Here are a few things to help you do just that.
Strengthen your savings
Since spending is slow, you might be able to find a way to put more into your savings. If you are just holding back trying to assess the situation, it is best to put a little more focus on your savings. One fund you can look into is your emergency fund. When the pandemic hit, one of the go-to funds people accessed is their emergency fund.
This is true especially for those who lost their jobs. Your reserve fund is meant to cover for your monthly expenses while you look for ways to get your income back up. The stronger your emergency fund, the more months you have to work with. While you are not spending that much, you can also find ways to put more into your retirement fund. Take a look at how you can put more or even max out your 401k at this time. Of course, you need to make sure that your needs are met first before you start putting more into your retirement nest egg.
Evaluate your investments
You can also take this time to re-evaluate your investment portfolio. When the pandemic hit, a lot of stocks took a dive and this is understandable. Businesses and several industries struggled to get their footing during this trying time. It caught almost everyone off-guard and adapting to the new normal was a race everyone was in.
But as shown in the past, investments especially in the stock market just go up and down. And the good thing is that in the long run, it is still a good way of making your money work for you. S&P 500 has been on a slow but steady increase for the past few months since it dipped due to the pandemic. This goes to show that you should not make knee-jerk reactions when it comes to stocks. In fact, it is a good idea to invest when the market is down.
Strategize on your goals
While spending is down, you can use this time to look at your goals and identify areas you can improve on. Remember that you need to keep improving your finances so you can quickly adapt to whatever situation that comes your way. As a lot of people and businesses are slowing down and being wary with expenses, it is a good time to go over your goals.
A good place to start could be your new year’s resolution list. These are goals you have for the year which you put together before the pandemic hit. Now that the health crisis is still ongoing, you can go through your list and re-evaluate them. You might be planning to buy a second car or buying an expensive property near your office. These goals can be put on hold so you can focus on other more important matters.
Buying a second car will not make a lot of sense now that most people are asked to stay at home. That expensive piece of property near your office might not matter that much. Work from home is now being pushed which means you can take away a lot of the travel time to and from work. Re-evaluate your goals so you can adapt to the current situation.
Put a little more time on your hobby
As people spend less, you might be able to use the downtime to spend a little more time on your hobby. It can be baking, design, book reading, or even creating small wooden furniture. This will be a lot of help in passing the time and in keeping you busy. Also, one benefit this can give you is that you can turn it into an income-positive hobby.
If you love to bake, you can sell your creations online and you can start with family and friends. The same with making wooden furniture or even with design. You do not even have to set up an expensive brick and mortar shop. It is relatively easy and quick to put up an online store and start selling your creations online. Not only will you be spending time with ana activity you love, but it can also bring in extra money into your finances.
Spending is down now because people are either afraid to spend or simply unable to spend the way they use to before. Regardless of the reason, you can use this time to look for ways to make improvements in your finances. This can help you manage and stretch your current finances as well as prepare for future needs.