By Michael Banks
A year and a half into the “new normal” and spending during the pandemic is a matter taken a little more seriously than stimulus check memes for Abey Philip.
Philip, a first-generation college student studying political science and history at Yale University, has had to get creative in supporting his way through a gap year working an unpaid internship with the Federal Defenders Office. It’s a gap year that he alone is financing.
Because his work is unpaid, Philip has supplemented the costs of living through three other part time roles that cover his costs of rent and living expenses. He claims his ability to sustain himself comes from his meticulous ability to budget.
“The importance of it really started feeling real in that first month between roles. I had to pay rent and put food on the table, and if I didn’t stick to it, I couldn’t do either of those things,” Philip said.
But his attention to budgeting is not one shared by most Americans.
A recent survey conducted by the U.S. Bureau of Economic Analysis (BEA) found that the personal savings rate for the average American, a percentage of disposable income left after people spend money and pay taxes, has dropped in recent months. Personal savings hit a high at 9.9% nationwide in August of 2021 only to drop to a rate of 7.5% the following month.
Sarah Simon, managing director at wealth management firm Cresset in San Francisco, says this decrease in savings is to be expected due to stronger public markets and low interest rates.
“We’ve seen the savings rate and amount of cash families like to keep on hand increase early in the pandemic. Now that we’re kind of returning to normal, people are not just spending, but investing, as COVID restrictions are lifted,” Simon said.
She also points to low-interest rates as a cause for the behavior of both families and businesses keeping more cash on hand.
For a financially independent college student like Philip, this has translated to less money saved in the bank that is being put towards things that weren’t possible in the height of the pandemic.
“I saved so much money by cooking at home, but now that places are opening up and work is returning to in-person I’m spending more money now on eating out than I did before the pandemic,” he said.
The American Institute of CPAs found that blind spending is a developing phenomenon contributing to budget disillusion. They found in a June survey that 52% of consumers indulge in unnecessary purchases by using platforms like ApplePay for online shopping, making it easier to buy what they want without thinking long-term.
Their survey also found that consumers don’t know their debit or credit balance until they get their monthly statement.
For Philip, keeping track of receipts as he makes purchases has been a critical part in accurately estimating his monthly budget for living expenses.
“If you know what’s coming, and you know what to expect and try to expect the unexpected things, you avoid this kind of money anxiety that comes with checking your credit card statements every month,” he said.
Both Simon and Philip emphasize that just like before the pandemic, it is important to be honest with yourself in building a budget so that it’s sustainable for your lifestyle.
“I was raised to be very intentional with how I spend my money, but the past year and a half has made myself and other low-income individuals and households I know be even more intentional with budgeting and getting a bang for our buck,” Philip said.
Michael Banks is a journalism student at the University of Georgia.
