Somewhere during the pandemic, Americans started redefining the way they view spending "necessities."
Out were the trips to malls, restaurants, and bars (much of that due to forced lockdowns) and in were strategies that paid down household debt and focused on "must-haves" like groceries, auto maintenance, and home renovations (to boost the value of a major asset.)
Now we're starting to see some data on the nationwide spending curb, or at least the new meaning and magnitude of household spending.
Case in point - Credit Karma’s recent spending survey shows how nearly half of the 1,000 respondents feel less pressure to keep up with appearances and plan to spend less on going out after the pandemic.
New data from the study shows that the pandemic has also changed the way people are budgeting, tossing previous budget plans like the 50/30/20 rule, out of the window.
Credit Karma’s data revealed:
--- 46% of Americans are spending more than 50% of their monthly income on needs like bills, groceries, childcare and housing.
--- 41% are spending less than 15% of their monthly income on wants like entertainment, hobbies and shopping.
--- 45% are putting less than 15% of their monthly income towards savings.
--- Almost half of those surveyed (47%) said they’ve realized they don’t need to spend money on dining out since the pandemic began. In addition, more than a third of respondents (37%) said they no longer feel the need to spend money on going to the movies, and 28% said the same for live music and entertainment.
--- Nearly half of those surveyed (44%) predicted that post-pandemic, they’ll feel less pressure to spend money to keep up with appearances.
--- More than three-quarters of respondents (78%) have adopted new personal finance habits during the pandemic they want to keep, such as keeping track of their finances more closely, cutting back on daily spending and maintaining a monthly budget.
With more than two-fifths of Americans allocating less than 15% of their monthly income to wants and savings, that suggests a typical budget might look a lot more like 80/10/10 these days — where 80% of people’s monthly income goes towards needs, 10% goes towards wants and 10% is going into savings.
Back to Balance
This all good news on the consumer financial front, as Main Street Americans look for ways to cut down debt, balance their budgets, and still enjoy some creature comforts - if not at the level of pre-pandemic household spending rates.
By taking aggressive action steps like creating and sticking to a household budget, cutting expenses, and be disciplined - but patient - with good financial habits, anyone can vastly improve his or her household money situation.
For the long haul, too.