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Preparing to spend

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The roadmap out of lockdown continues with restrictions lifted on outdoor dining, non-essential shops, beauty services and gyms soon to include indoor hosting and dining, museums and cinema visits. This easing of restrictions could spark a surge in consumer spending after more than a year of ‘accidental’ saving. But are people looking to spend or are those saving habits here to stay?

A survey [1] showed that a third of people who managed to save money during the pandemic aren’t planning to spend it, even as restrictions lift. 56% [2] of people have managed to save during the UK’s lockdowns with the amount of cash sitting in bank accounts set to increase by £180bn [3] between the start of the pandemic and June this year.

Many are likely to feel anxious about spending after adjusting to a pandemic budget and the future still uncertain. With expenses set to rise again as companies consider returning to the office and the government roadmap unfolding, it’s important to keep on track with savings.

Rainy day fund

Covid-19 has highlighted the importance of having accessible savings for unexpected costs or periods of financial hardship. Whether you have a rainy day fund set up or are looking to begin one, be sure to prioritise that pot by regularly paying into it and not dipping into it for anything that wouldn’t be considered a rainy day expense. How you define a rainy day expense is up to you, but typically a rainy day fund is used for a short-term, unexpected costs such as a large bill or household repair.

Save direct from payroll

A great way to save without ‘feeling’ it, is to save direct from payroll. This means redirecting some of your salary regularly into a savings account or ISA, it can also be called a payroll deduction. You can control how much you wish to save and without any future action from you, it gets deducted each pay period creating a valuable savings habit. By adjusting to your new monthly take-home pay, you can spend confidently in the knowledge you are saving with minimal effort, and you’ll hardly notice it!

Find your comfort level

Just as people have varying levels of comfort with Covid-19 and engaging in social activities, people also have varying levels of comfort with spending and saving. It’s important to be comfortable about what you’re spending and saving to prevent it from becoming a source of stress. Similarly to getting FOMO when seeing others enjoying a relaxation of restrictions, it is easy to be unsettled by seeing others splashing the cash. The link between our mental health and finances is strong and is important to monitor. Spend some time thinking about how you’d like to prioritise your spending vs saving and decide on a budget that you are comfortable with. Then, using ‘fun funds’ or saving pots, bring that prioritisation and organisation to life. Check in with how you’re feeling and how your accounts are looking every so often to see if it is still working best for you.

Review your commuter spending

A commuter’s spending pattern, and routine, over the last year has been very different from what we considered the norm over a year ago. Traveling from your bed to your desk, popping to the fridge for lunch and then closing the laptop at the end of each day has become the new normal, as has the lack of cost associated with those minimal movements. As we consider returning to the office and restabilising that since forgotten commuter routine, it is important to incorporate the costs associated with that lifestyle into any budget you may use for your finances. However, it is also an opportunity to consider those choices and costs and make new habits around them, both personally and financially. Perhaps you’ll take lunch a few days a week, be sure to make that train to avoid any last-minute cab fares or walk those last few tube stops, just for you (and only when it’s sunny).

Read the small print

While we are still slowly easing out of restrictions and anything more than the short-term future is still uncertain, be sure to read the fine print especially when booking holidays. At the moment, lots of airlines have active free-change policies but with foreign summer holidays a possibility this could change at any time. Many stay-cation resorts have a 50% cancellation fee and the going rate for a restaurant table cancelled within a 24-hour window is £25. While we remain optimistic about what the future holds, no one wants to lose money on something they aren’t able to enjoy.

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Cushon provides high-quality impartial information but not financial advice, so it is important that you understand the risks of investing.

[1] Comparethemarket.com household financial confidence tracker survey results – April 2021

[2] Comparethemarket.com household financial confidence tracker survey results – April 2021

[3] Office for Budget Responsibility – March 2021