Surge in Pandemic Spending Drives Shoppers to Cut Up Credit Cards
Streaming subscriptions. Comfort food delivered. New work-at-home loungewear.
Millions of people discovered last year that while there weren’t many things to do during pandemic lockdowns, there were plenty of things to buy. American household spending rose for six consecutive months, even as personal income dropped, after a dip in March and April.
But with people’s finances entering a shaky period this winter, some are going to great lengths to tighten their loose purse springs.
They’re experimenting with an extreme form of austerity: spending nothing for a month, except for a limited list of essentials. The “no-spend month” rules can range from skimping on things like eating out at restaurants and buying new outfits, to forgoing fast food and even mass transit. (Why take the bus when you can walk or bike?)
In the U.S., it’s a personal challenge that comes at an uncertain time for consumers. The country’s unemployment rate in Decemberstalled at 6.7%, and the labor market shed jobs for the first time in eight months. One round of $600 stimulus checksmay not have been enough, and a$1.9 billion booster promised by President Joe Biden is meeting resistance from Republican lawmakers.
For Ryan McRae, 47, the pandemic seemed to be an excuse to impulse buy. He and his boyfriend noticed they were spending more during lockdown.
“If you include the clause ‘because there’s a pandemic,’ you can make an excuse for any purchase,” said McRae, of Chicago. “After the holidays, we took a look at our bank account and decided to cut back.”
That meant no new books or clothes, and no fast food — even going so far as bringing prepared meals when visiting friends. He estimates these changes will save them about $1,000 in January.
“It’s only the necessities,” he said. “If the oil needs changing, done. A shiny new thing from Amazon? That’s a no.”
In budgeting groups on Facebook or Reddit forums, people ask for advice about how to occupy their time with activities other than shopping, or proudly display how little they spent on groceries.
“It’s hard when you see everyone on social media with new stuff, and you’re getting all the Black Friday deals in your emails,” said Claire Arredondo, from San Antonio, Texas. The 23-year-old, who is unemployed while recovering from a hip injury, started ordering things online early on in the pandemic and found herself with eight new handbags, some that were worth hundreds of dollars apiece.
So in November, she decided to try a no-spend month. She made a strict grocery list to avoid buying non-essentials, and committed to zero online shopping. In the rare instance she needed something, she went to a thrift store.
“It wasn’t as hard as I thought it’d be,” said Arredondo, who says her largest purchase for the month were shoe insoles for her father. “I’ve spent way too much this year. I don’t need anything else.”
A McKinsey report published in December found that 40% of Americans planned to limit their discretionary spending in the coming months.
Mark Reyes, an adviser with money management app Albert, says a no-spend month could be helpful for if people have the right goals. Cutting back on overspending, like Arredondo did, is realistic. But bigger challenges like credit-card debt or unaffordable rent require longer-term solutions.
“There are people who say ‘I can cut out $1,500 worth of spending in a month,’” Reyes said. “But that’s ambitious. You don’t run for a marathon after training for a day.”
Barbara Ahonsi, 26, a software designer from London, said the secret to maintaining discipline during her no-spend month in October was cutting up her credit cards.
“I took out cash and gave myself a ration of £50 ($69) a week,” Anhosi said. “If I ran out of money before the week was done, that was it.”
Some people have planned to reward themselves for their spending abstinence. Abi Eko, 26, saved an estimated 400 pounds during her month. So she has decided to buy a new outfit for her birthday this year.
“I plan to buy something nice, even if it’s just to wear at home,” she said.
Things to keep in mind if you want to plan a no-spend month, according to Hersh Shefrin, finance professor at Santa Clara University’s Leavey School of Business:
- It’s typical to want to make big purchases once a no-spend period is over, so plan accordingly. “People need to be mindful that if they repress the urge to consume this month, then they might generate pent-up demand to spend in future months,” Shefrin said. “Anticipate this. Put a little bit away for a little extra treat, to reward yourself in a regular-spend month.”
- Short-term minimalism might work as a last resort, but it’s better to simply budget wisely and develop sustainable cost-cutting habits, Shefrin said. “Only one in three households admit to preparing budgets,” Shefrin said. “So no-spend behavior is not for budgeters but for some of the two in three who don’t budget and can’t find a way to save enough any other way.”
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