Amongst all of the negative news behind COVID-19, it’s hard to believe that there can be some positive opportunities hidden in all of the mire. It’s so well hidden that many of us may not even notice it and miss out on the unique opportunity.
But before we jump into this opportunity, we have to look at the context – one that we are all living through right now.
Reduced Discretionary Spending
Many of us in Canada are either still under a partial lockdown or are slowly emerging from it. During this period, most household’s discretionary expenses have dropped – we’re not going to movies, restaurants or going on trips. I mean, I personally can’t even remember the last movie that I saw in theatres.
And this change in spending has been happening for months! The majority of this drop is occuring in our discretionary expenses. You know, the items which are nice but not really required to survive? In other words, we are not spending as much on our wants while the majority of our spending on needs hasn’t changed by much.
A Spending Reset
And this is where we find our opportunity. COVID19 is essentially hitting the metaphorical restart on our discretionary spending and it’s our choice to decide how it restarts.
Conveniently, discretionary spending is also often where we have a tendency to overspend and is easier to reduce than the expenses that go towards our needs. It’s much easier to reduce our spending on going to restaurants than our rent or mortgage.
Spending Habits Are Hard To Change
Normally our spending habits are often very ingrained and difficult to modify. We’ve been acting in a set way for many years and the habits are intertwined with our lifestyle and social structure. This is one of the big reasons why we often find sticking to a budget so difficult.
And research shows just how challenging it is to change habits, a study from the University College of London found that it took an average 66 days on average to change habits, but their subjects had ranges between 18 to 254 days.
Interestingly, the 21-day figure that most people tout is actually based on a book called Psycho-Cybernetic from 1960 by a plastic surgeon and is related to how long it takes medical patients to get used to their new faces – obviously a questionable assumption about everyday activity.
Why This is So Important
Just recognizing this opportunity identifies an inflection point where we can consciously develop new and healthier financial habits, or we keep doing the same old before the health crisis.
Without knowing about this opportunity, one has a higher chance of just slipping back into their old spending habits.
Reducing your discretionary spending will cause your future self to thank you. You can put any extra funds towards those financial goals that are important to you – like buying a new home, paying off debt or that large purchase that you’re excited about.
Because our habits and lifestyle have been changed so heavily during this crisis, we will find it much easier to design our spending in the leanest way possible. The economy is also opening up in stages, so this can also help gradually modify expenses as they become available.
To get the most out of this opportunity, you can either update your whole budget with what you want to spend post-lockdown or just focus on a few key discretionary expenses that offer the largest savings opportunity.