How the Pandemic Has Changed Our Spending Habits

How the Pandemic Has Changed Our Spending Habits

If you’re feeling pulled in multiple directions financially, you’re not alone. Endless months of pandemic-style penny-pinching were followed by predictions of an opposite, roaring-20s-style spending spree this summer. What we got instead has been a little of both – and warnings by financial advisers not to go overboard.

With 2020 in the rearview mirror, the country can sometimes appear divided between people struggling to pay their bills and pandemic-fatigued folks who are ready to shop til they drop. The truth is, many people fall into both groups. In other words: it’s complicated, as personal finance often is. Take a look at some of the patterns emerging in recent months and what they might mean for your bottom line.

More Debts Being Paid off Sooner

For now, Americans appear to be spending more responsibly than in years past, when racking up debt was a routine personal finance strategy. This is partly because, in the past year, more consumers have had to spend their dollars on the bare necessities. With substantial stimulus funding and unemployment giving households a financial boost, many people have gotten a head start on paying off debts. Others plan to start paying off loans and credit card balances in the coming months.

The pandemic forced many people to be more cautious with their money. Credit card balances have fallen significantly while personal savings hit record highs. That is something to celebrate, but don’t let the euphoria lure you into complacency. It’s still important to recognize if some of those cards are working against you instead of for you. If the latter is true for you, a prepaid debit card can give you the benefits of plastic without the interest rates or temptation to overspend.

Frugality and Debt the Norm

Last year’s events turned many things on their head, and that includes the way consumers spend. Despite stronger job numbers and reopened economies, most people in the US still consider themselves frugal. According to Investopedia, 64% of Americans saved money in 2020, and 80% said they planned to save more than they spend in 2021.

If the pandemic has taught us one thing, it’s the importance of budgeting for the unexpected. But has the pandemic really changed our spending habits? Some of that frugality may be waning. The truth is, many consumers may go into debt so they can feel free to spend their dollars on necessities as well as fun. For the most part, young people are in the mood to splurge, while their elders are more prone to saving, according to a CNBC report:

  • Millennials (24-40) are most likely to take on more debt (59%).
  • Gen Zers (18-24) are at a close second (56%).
  • 40% of Gen Xers (41-56), and
  • 32% of baby boomers (57-75) expect to take on debt.

Future Spending Sprees Come with Dose of Caution

Understandably, there’s still a lot of pent-up desire for normalcy, and it remains to be seen what will happen as a result. For now, more than two-thirds of Americans plan to spend money in the second half of the year on items like travel and out-of-home entertainment. And who can blame them?

But if you’re feeling the urge to splurge, do so with caution, as credit card interest rates are going back up. Before buying that jet ski you’ve had your eye on, make a list of your long-term financial goals and create a realistic monthly budget for getting there. Rates average around 16% – higher if your credit scores are low – so excelling your interest rates could push you even further into debt.

Prepare Financially for the Unexpected

Being able to shop in person and visit with friends again is certainly worth celebrating. As you build your life back up, hold onto any newfound, wiser spending habits. And take advantage of the many convenient services at your nearest Community Financial Service Centers (CFSC). Our check cashing, debit cards, and other related services help countless individuals and small businesses take care of nearly all their financial needs – quickly, under one roof.

And if you’re frustrated by your own slow recovery, have patience. The pandemic is not quite over, and financial wisdom will be necessary to get us through whatever hills or valleys come our way.

Here at CFSC, we can help you get fast access to cash through our check cashing services when you need to make purchases or pay your bills. Some locations have expanded services to support title, license, EZ-Pass and MetroCard services. And many locations are open late and on weekends for your convenience. Check us out online, stop by, or call your nearest CFSC for the details on how we can serve your future financial needs.

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