With the world gradually reopening, it’s easy to feel giddy excitement about the potential to book an exotic holiday or refresh your tired lockdown wardrobe.
However, savings should still be a priority!
The Bank of England set a 2021 target of 2% inflation, which it’s blasted past (we’re currently at 4.1%), so now might be a great time to keep your cash stowed safely and avoid splashing out on a whim.
Inflation means surging consumer prices and that everything we buy will cost more. If you’re keen to maintain your COVID savings, we’ll share some advice to keep your spending under control.
1. Making Informed Spending Choices
When working out any household budget, the first factor is how much you spend and how much you keep back.
Lockdown living has transformed the way most of us live, meaning that we’re spending more than ever on things like:
- Online shopping
- Grocery food deliveries
- TV streaming subscription packages
If you’re working from home the majority of the time, as many of us are, it’s also likely you’ve shelled out for a beefier broadband package, perhaps a new desk and home office supplies to keep things ticking over.
Rationalising what you spend on luxuries is a great way to cut down on casual spending that quickly adds to big bucks.
For example, if you have four streaming subscriptions, could you cut that back to two or opt for a pay-as-you-go option to spend less overall on home entertainment?
2. Use a Budget Planning Tool
The spending frenzy is, in part, due to the retention of lockdown spending habits, without reducing these when normal activities resume.
If you’re now eating out once or twice a week or picking up lunch on the way to the office, you might not still need that meal delivery plan – and probably aren’t aware of how much a chai latte a day siphons from your monthly budget.
Payment options like Buy Now Pay Later (BNPL), one-click Amazon Prime ordering and automatic checkouts are also culprits intended to make us spend more than we should.
Budget planning tools are a perfect way to have a firm grip on exactly what you’re spending, when and where, so you can work out why that item deserves a place in your priority-spending list.
The financial experts at Wonga offer a free guide to budgeting and managing your cash flow, including a downloadable planner and tips on creating a liveable budget and finding cost-efficiencies in your daily costs. We suggest checking out their blog section for the free downloads.
3. Keep an Eye on Your Credit
Next up, as we’ve mentioned BNPL and one-click ordering, the logical progression is to consider what you’re spending on interest charges.
Reducing debt is stage one to reaching the gold standard of budget management.
If you consider interest spent as ’empty money’, you’ll see why it’s important to repay any minor obligations before spending expendable cash on anything else.
There are thousands of ways you might end up with a credit account:
- Upgrading to a new mobile
- Paying an insurance policy monthly
- Taking out a credit card or payday loan
- Tapping into your current account overdraft
- Deferring online purchases through BNPL
Credit agreements, by and large, show up on your credit score, so keeping these to a minimum is advisable if you have any intentions to invest your savings into a property deposit.
Fast, easy credit applications can be tempting if you’re concerned about spending your savings on anything new, but the cumulative interest can drip-feed your savings into a lender’s pockets.
4. Beware of Revenge Spending
Most of us have had a fairly restrained couple of years (putting it mildly), and families have increased their savings to record levels due to travel, socialisation, and entertainment restrictions.
The phenomenon of revenge spending is global and means that consumers are quickly spending way more than they habitually would to ‘make up’ for the lost time.
It’s a little like when summer first arrives, and everyone flocks to the beach – but blowing your savings for the short-term thrill can leave you with a nasty sunburn.
Try to rephrase your thinking, appreciate the tough few months you’ve had, and celebrate the security that having a tidy nest egg provides!
After all, if the pandemic resurges (which we hope against hope it won’t), a contingency budget could become extremely important.
5. Grow Your Money Instead of Depleting Your Savings
Even if you’ve never invested before, the rising inflation that makes borrowing so expensive also makes it a great time to be a saver.
Investing your money can be unbelievably satisfying, especially when your monthly account statements reflect steady growth that could make your aspirations a reality.
Depositing savings into a regular account will, at the moment, earn you up to about 2% interest, but a high-yield account or fixed-term bonds could be far more lucrative.
It’s always worth seeking professional advice before making any at-risk investments, but there are countless opportunities if you’re interested in giving it a go!
6. Steer Clear of Social Media Advertising
Our final tip is to be mindful of how you shop, why you shop, and what factors impact your spending decisions.
Social media is a minefield of persuasion.
There is a temptation to live in a world of comparison, where everyone you know seems to be remodelling their kitchen, buying a new car, or showing off their incredible holiday snaps.
If you’re serious about conserving your lockdown savings, make a plan that meets your goals, and avoid any influences that detract from your aims.
Spending is one of many ways to generate instant gratification. Still, long-term millions of people struggle without any savings or find they’ve overstretched and don’t have a cushion to fall back on.
Repaying debts, making your money work harder for you, and having a safety net for tough times are powerful ways to protect your financial future.
Growing your rainy-day budget can take a little willpower, but it is also the best way to reach your big-picture targets.