Economic Shutdown: So What’s Next?

Here we are, two weeks after the conclusion of May’s Economic Shutdown. First things first, we have not blown through all the savings we worked hard to accumulate last month. That’s accomplishment number one! We have stuck to our conviction of eating meals at home and meals we bring to work. With only a few exceptions, all of our food has been purchased at the grocery store or has been of the convenient “take-out” nature. That’s not to say we plan on staying in an Economic Shutdown, but the reality of the experience we had was that keeping money from slipping through the cracks isn’t painstakingly difficult. Thinking twice before swiping the credit card and asking yourself if you really need those few things on Amazon or at Target will go a long way in shoring up loose ends. Let’s be honest, how much crap do you have that is stored in boxes or in closets that you don’t use, need or even want! Typically, we accumulate these items over the years through mindless purchases while trying to occupy time or fill some unknown void that you can’t plug. Spending money is kind of like eating junk food… it feels great at the time and is certainly fulfilling for a bit, but ultimately you end up regretting (or more appropriately, not needing) that purchase (or bag of Cheetos). Junk food is also a great example of wasted spending…but enough with the food analogies.

Let’s talk about the influence that marketing and advertising has on us. Every day we are inundated with products and services to consume. We are shown examples of the people we can be if we only buy this brand or use this service. Our lives will be bigger, faster, stronger and all it takes is a “one-click” purchase and next day delivery. By no means is this a knock on the purchase of consumer goods, but it should be an eye opener to the difference between needs and wants. There is plenty of room for both, but as the wants become more engrained in our daily habits, the line between the two starts to blur. We start to approach the wants in our lives as items we’re entitled to, and at the end of the day it gets expensive. Adding monthly obligations to our financial lives is the quickest way to the paycheck-to-paycheck mentality. We’ve covered this topic before in one of our weekly podcasts and in the blog post found here. This, needless to say, is a mentality we’d like to avoid if at all possible.

Typically, the most expensive day(s) for us are the weekends. That’s when we have more time to do fun things and that often equates to an expense here or there. Whether it’s a movie, round of golf, Home Depot or wherever you prefer to do-it-yourself, the days we spend outside of work are the priciest. Having a handle on what you enjoy and where you prioritize your money is paramount to avoid the trap of overspending. So, how do we accomplish this?

  • Pay Yourself First
    • There are various opinions on this principal and different ways to “jazz it up,” but at the end of the day, the most successful savers save first!
    • The most common example of this is to save into your company retirement plan. It happens before the paycheck hits your bank account, and you don’t even have to think about it.
  • Save Cash Each Month
    • Even if you ultimately end up investing this cash, it’s important to save cash into a savings account (separate from your checking account) each and every month. This is money that is above and beyond your emergency reserve fund.
    • This prevents you from getting to the paycheck to paycheck mentality.
      • One quick example; while going through Economic Shutdown, we caught a nail in the back tire of our car. We had to replace it (obviously). Since we hadn’t already spent, or already obligated every dollar to be spent, this was a mere blip on the radar for the month. These are the types of things that totally derail a perfectly budgeted month. Hence, the importance to save a little extra cash into a savings account each month.
  • Prioritize
    • We all have things in our daily lives that we must spend money on to live, our bills, rent, food, etc. but going through the Economic Shutdown really helped highlight what we needed and what we wanted.
      • One example is the cable bill. It’s 100% a want. Rebecca and I didn’t “cut the cord” as they say, but we are pretty close to it. However, most people I talk to add that into their monthly bills as they do the gas bill or power bill. It’s really not.
    • When we prioritize, it helps us do two things:
      • It helps you enjoy the experience/utility of what you’ve chosen to spend that dollar that you worked hard to earn.
      • It will ultimately result in you spending less each month.
  • Be Flexible
    • Don’t let “money stress” ruin all of life’s wonderful experiences. If you spend too much in one month, don’t beat yourself up. Just save a little extra next month. Where many people get in trouble is they always plan on making it up next month. That should be the exception, not the rule.
  • Forget The Joneses
    • No, not your neighbors Jim and Jane, but the proverbially Joneses. Keeping up with the Joneses has leads to more harm than good. Everybody has a unique financial situation in one regard or another…and it’s a losing game to “keep up”. One thing I can guarantee, there will always be someone richer than you and there will always be someone poorer than you - so just be you!