2020 significantly altered our financial behaviors. It’s essential to reassess these five budget areas as we welcome a new year.
Since March 2020, recent graduate Emily Shutman transitioned from two streaming services to nearly every option available. After graduating in May, she began her consulting career and gained financial independence. Shutman finds that increased spending on streaming has provided entertainment in a time of limited social activities.
This shift in spending habits reflects a broader trend influenced by the pandemic. With remote work, childcare challenges, and canceled vacations, many have overhauled their budgets. Initially, it seemed manageable to maintain spending; however, we now understand that a return to normalcy may take longer than expected. The new year brings a fresh chance to reassess our finances, especially in these five budget categories.
Streaming Subscriptions
Like many, Shutman expanded her streaming subscriptions during lockdown to stay engaged. The question remains: why did we feel compelled to subscribe to so many services? According to financial advisor Kim Katz, it stems from a desire for comfort during uncertain times.
While some subscriptions are affordable, others can cost over $60 a month. Reviewing and prioritizing your subscriptions is crucial, suggests CPA Michele Cagan. To strengthen your emergency savings, consider reducing your subscriptions. Instead of six services, try cutting back to four.
“It’s challenging to advise cutting back when options for entertainment are limited,” Cagan notes. “But this is a prime opportunity to boost your savings.”
Dining and Groceries
With fewer people dining out regularly, many have shifted their spending to groceries and takeout. Dalia Zada, a teacher and graduate student in San Diego, reports increased grocery spending to maintain her vegetarian lifestyle.
“My grocery budget has increased, but it feels worthwhile as it supports healthier choices,” Zada shares. When dining out, she consciously chooses local establishments.
With limited social options, Shutman finds herself dining out more with friends and family, increasing her restaurant spending. Both Zada and Shutman’s habits mirror trends observed by Cagan. While she advocates for supporting local businesses, she emphasizes sticking to your budget and avoiding excessive grocery stockpiling.
Childcare Expenses
As families adapted to remote work and learning, spending on entertainment for children surged. Parents prioritized keeping kids occupied, often investing in educational toys and resources. Cagan reminds us to be mindful of expenses and to tighten budgets, recognizing that staying home will likely continue for some time.
Charitable Contributions
One unexpected trend during the pandemic has been a rise in charitable giving. Katz observes that economic downturns typically lead to reduced donations, but this time, the response has been widespread across all income levels.
Many have felt compelled to support causes they value due to the pandemic’s impact. Zada mentions her budget specifically allocated for mutual aid and fundraisers, driven by visible community needs.
Adjusting your budget for charitable contributions is a practical approach to support others while remaining financially conscious.
Clothing Choices
Comfort became a priority during the pandemic, leading to a notable increase in leisurewear purchases. For instance, a fashion site reported a 40% rise in sweatpant sales during lockdown. We’ve shifted our spending from formal attire to comfortable home wear.
“If I buy clothes now, they’re comfortable ones for working from home,” Zada explains. “I’ve become more aware of unnecessary clothing purchases.”
Katz encourages a holistic view of spending, advising to be mindful of how money is spent, particularly on comfort items. Reflect on whether that extra pair of shoes is truly needed.
As we adjust to writing “2021” on our documents, remember that budgets should remain flexible. It's okay to modify your spending plan as circumstances evolve. The key is to be intentional about your financial decisions moving forward.
