After a long pandemic where most people have been cooped up at home with nothing to do, the prospect of attending a concert or going on a vacation will seem very appealing — perhaps too appealing.
Balancing spending and saving is a real struggle for most of us, and to some extent that struggle is a byproduct of our biology, financial therapist Amanda Clayman told viewers during MarketWatch’s Mastering Your Money event last week.
“Mastering Your Money” is a three-part series of discussions where MarketWatch editors and reporters speak with panelists to help people get a handle on their finances.
The first session, held on Feb. 3, addressed getting started with the basics, spending and savings strategies and balancing debt with other financial obligations. In one of the first panels, Clayman was joined by Realtor.com’s chief economist, Danielle Hale, for a session devoted to breaking down the challenges people face in building savings and exploring strategies to avoid overspending as a result.
Growing your savings while managing monthly spending can be challenging, especially amid the disruptions of COVID-19.
“Back in our hunter-gatherer days there was no such thing as refrigeration or banks,” said Clayman, who also hosts “Financial Therapy with Amanda Clayman” on the podcast series “Death, Sex & Money” from WNYC Studios. “Our hardwiring is all around thinking of what we need in the present.”
Bigger goals, like saving to buy a home or for retirement, can be motivating. The problem, Clayman said, is that they are “often hard to translate into the day to day.” Because we don’t get to experience the benefit of those efforts right away, it can feel fruitless.
That’s especially true when it comes to the so-called fear of missing out, or FOMO. As both Clayman and Hale noted, people’s approach to spending and savings nowadays has been shaped by the coronavirus pandemic.
Make the choice before you get the invite
The good news is that a 63% majority of people have been able to grow their savings, Hale said, citing Realtor.com’s research. Certainly those who lost their jobs or were forced to spend more on things like childcare have not been so fortunate, but for those who could manage to increase the amount of money they were squirreling away the savings rate is nearly double what it normally is lately.
But the trouble may come once people can start spending again. So many of our usual sources of leisure and entertainment are unavailable right now because of COVID-19. So how can people say no when they’ve been stuck at home with little to do for so long?
For Clayman, it’s not really about saying “no” per se. She suggests that people start off by exploring their financial priorities before a major spending decision comes their way. Then the choice is not whether you want to go to the concert. Instead, the choice is what do you want your money to do for you and where does attending that concert fit into your other financial goals?
“There will always be more things that you would like to spend money on than you can,” Clayman said.
To get more tips on how to guide your financial decision-making, be sure to check out the next two sessions of “Mastering Your Money,” which will be held on Feb. 10 and Feb. 17 and will include sessions about taxes, insurance, estate planning and retirement savings.