Why I’m reassessing my spending while staying at home

The current stay-at-home order offers an opportunity to reflect on our finances

I’d grown accustomed each month to opening the credit card bill and wincing. Was that number at the top of the statement my outstanding balance or somebody’s phone number? I jest, of course, but I was consistently perplexed by our family’s inability to get the spending under control. What were we buying, and did we even have anything tangible to show for it?

This billing cycle, I was shocked when I opened my monthly credit card bill to see my family and I had spent one-fifth of the amount of money in April than we had spent in each of the first two months of the year. I knew, of course, that living in relative isolation for over 60 consecutive days (who’s counting?) had meant less spending, especially on discretionary items, and as I am lucky to be able to work from home, that all meant savings that otherwise wouldn’t have appeared.  

Don’t get me wrong: there are negative economic implications from a spending decline that go far beyond my personal finances. As Jerry Garcia sang, “Every silver lining has a touch of grey.” After all, my spending influences somebody else’s income. Multiply my decreased spending by millions across the country and billions globally and the result is a disastrous economic outcome. For evidence of that, look no further than the jobs report, with May 8’s report being the worst on record.

A lesson to be learned

Nonetheless, there are lessons to be learned here. A comparison of my January credit card statement with my April credit card statement revealed that prior to the COVID-19 outbreak, I had unknowingly been showing myself a pretty good time. It turns out that the lion’s share of the difference between the two statements fell within two categories—entertainment and food and drink. As James Carville might have said, it’s the coffee and the cocktails, stupid. And the daily lunches and the Saturday night dinners, not to mention the rideshares home from those dinners. The reality is that two months into social distancing, I am still as caffeinated as ever and relatively satiated by—and extraordinarily thankful for— my meals. The 80% spending cut didn’t result in 80% less satisfaction.

Certainly, the opportunity to assess your spending is a luxury of those who’ve been able to retain their jobs. Those whose employment has been less secure are having to make more difficult decisions about how to manage their finances.

Importantly, I am also not advising that consumers stop supporting their local restaurants or the businesses that drive their communities. It’s not all or nothing. Personally, I am itching to begin reengaging in the economy. A night out at this point would be a delightful change, one I probably would have taken for granted in the past.

Here’s what I would say: for those who remain employed, this is a valuable moment to re-assess their finances and get back to understanding your own financial fundamentals. Considering that we all lead complicated and busy lives, it is so easy to lose track of where all of our money goes each month. I suggest consumers to look at their credit card statements and determine where they are spending money, what has fallen away, and what wouldn’t be missed in the future. For example, $10 per day for lunch over the first 20 years of a career is $50,000. Emergency funds for uncertain times are built by recognizing such expenses and adjusting appropriately.

Realistically, a persistent 80% decline in my credit card bill each month from the January 2020 level is unsustainable, for me personally and for our nation’s financial health. I want to support local businesses and have great experiences with my wife and children when it is safe to do so. However, I am committed to using this unfortunate time to reflect on spending and how it relates to my needs versus my wants. Shame on me if after this I am still perplexed by and wincing at credit card bills.

Important Information

The opinions referenced above are those of the author as of May 20, 2020. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.