This summer I saw many of my favorite artists in concert, took trips I won’t soon forget, and started updating my wardrobe for the return to the office. It’s been gratifying to be back in the community with other fans, to be part of cultural moments that have been rare in recent years, and to spend time out in the world with the people I love.
It was also, well, expensive. I don’t regret the money I paid, but with the weather starting to get cooler (or at least cooling down) here in New York, it seems like the right time to recalibrate my budget and cut back on my spending too.
I’m probably not the only one who thinks this. Consumer spending has been strong in recent years, with spending on retail, travel and experiences particularly strong. Despite the Federal Reserve’s best efforts, Americans spent 5.8% more in August 2023 than last year.
Even though Americans haven’t had a COVID-19 pandemic-related lockdown imposed on them in years, there’s still a sense that we’re making up for things we missed — or that tomorrow isn’t guaranteed, so you “That.” might as well spend today,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
“We are in a YOLO economy,” says Samana, referring to the acronym for “You Only Live Once.” “We should be in an intermittent fasting economy to save for the recession.”
This fall is a good time to review your finances, even if you haven’t overspent. For nearly $44 million, October brings the first additional multi-hundred-dollar bill each month as federal student loans come due again. Credit card debt has surpassed $1 trillion, a record high. And gas prices have skyrocketed.
Interest rates have also been creeping up as the Fed tries to curb inflation, partly due to a lot of spending. A recession hasn’t happened yet, but if you’re like me, you’re always a little worried that it could lead to job loss or general anxiety.
Given all these macroeconomic and personal headwinds, financial advisors suggest the following to ensure your financial security.
Reconsider your budget
Look, no one likes to hear it, but to get a handle on it, it’s important to understand where your money is going. With prices on almost everything on a seemingly endless upward spiral, it’s important to take stock of what you’re paying and who.
For example: You probably know what subscriptions you’re paying for, but do you know how much you’re paying? Many have increased costs recently. If you’re going to the office more often and using public transportation, is it time to opt back into your company’s commuter benefits program?
“Take a close look at your checking and credit card accounts and review every purchase, charge and expense to determine what was a necessary purchase and where you may have overspent on something unnecessary, your ‘needs’ versus Your ‘wishes,'” he tells Mary Hines Droesch, head of consumer and small business products at Bank of America. “This can help you identify some areas where you may be able to reduce your spending in the Wants category as you re-evaluate your habits and priorities.”
There are a number of programs you can use to track your household’s spending. Software like Mint and You Need a Budget are particularly popular, and there are online communities you can join to gain more insight into these.
Make an “honest list” of your assets, debts and upcoming big expenses, recommends Kelly Palmer, founder and chief wealth officer of The Wealthy Parent, a financial planning firm in Chicago. “If you’re in a relationship, this is an extremely important step for your partner,” says Palmer. “Fall is a great time to reconnect financially with your partner before the stress of the holidays sets in.”
Personally, I track my savings and investments in a Google spreadsheet. I’m going to add up my daily expenses this month to get a more complete picture. I also receive SMS alerts of all my credit card charges and daily balance updates. You can do this by logging into your account on your bank or credit card company’s website.
Prioritize certain expenses
If I’ve deviated from my financial goals, I like to continue a no-spend month. During these periods, I avoid non-essential purchases or follow other rules I have set.
“Although it may seem like a drastic step, think of it like spending your money on an elimination diet to find out what you can really live without,” says Hines Droesch.
A month of no spending can be helpful because it is a temporary reset. However, reevaluating your budget doesn’t mean cutting back on all discretionary spending in the long run. In fact, this can often backfire.
“Allow yourself to spend a little on ‘fun things,'” says Hines Droesch. “Applying the 50/30/20 method to any budget is a universal way to ensure that the right amounts of your income are used to save and invest while leaving enough room to enjoy your hard-earned money.”
The 50/30/20 budget is a popular method for allocating expenses. After that, 50% of your after-tax income goes towards needs such as housing allowance, student loans, food etc. Another 30% goes towards needs and 20% goes towards savings (including investments).
“When you live below your means, you lay the foundation for a life of financial progress,” says Hines Droesch. “When you view savings as mandatory, it makes it much easier to seriously work toward achieving financial stability.”
Pay off credit card debt
Although student loan debt has received a lot of attention recently, credit card debt is often an even greater concern for consumers. The interest rate will likely be higher, and it may be more predatory. That’s why, once you’ve accumulated something, it’s important to focus on paying it off as quickly as possible, says Andrea Woroch, a family budgeting expert.
That’s doubly true in the current environment, because not only are consumers’ credit card debt at a record high, but so are interest rates: The average APR on credit cards was 24.45% in September, according to LendingTree, with 35% of cards that high Fees charge 29.99%.
Of course, many of these steps are easier said than done. What has helped me focus on these types of goals is finding others who are in a similar boat. There are personal finance-related Facebook groups and subreddits that can inspire you to stick to your budget, and TikTokers (like Jamie Feldman, who I featured here) who chronicle their journeys to paying off debt. If you only watch content that encourages you to spend money or talks about how pointless or difficult saving is, it’s difficult to make changes. But seeing or reading about how others do it can be the encouragement you need.
If you meet the requirements, consider a 0% balance transfer. With these offers, a credit card company allows you to use a new card to pay off a credit card balance at another company, often with a 0% interest rate for a set number of months. So if you have 0% for 24 months, you have two years to pay off your balance without accruing further interest. This can help you become debt-free, or at least make significant progress.
Think long term
As a millennial with a penchant for doom, it often feels silly to prioritize saving and investing when the future is so uncertain. That’s a common sentiment among younger generations: 45% of workers ages 18 to 35 don’t see the point in saving for retirement “until things get back to normal,” according to a 2022 report from Fidelity resulted.
I won’t pretend to know what the future holds. But one thing that has helped me is realizing that no matter what happens, there probably won’t be a time when I wish I had saved less money.
One thirtysomething called it a savings in a “nihilism fund” for me. Focusing on what you can control in an uncertain world can be empowering.
get help
If you’re struggling to maintain your budget, there are ways to ask for help.
For example, if you have a federal student loan, an income-driven repayment plan can help lower your monthly payment. The new SAVE plan is particularly generous. You can apply on the Ministry of Education website.
If credit card debt is weighing you down, you may be able to negotiate your interest rate, consolidate your debt, or enter into a payment plan. Take an afternoon to call your credit card company and see how they can help you.
“If you’re having trouble, talk to creditors and work with them to pay off your debts,” says Brandon Robinson, president and founder of Texas-based financial firm JBR Associates. “Many are willing to be flexible.”
Another option is to work with a credit counseling firm who can advise you and help you develop a budget and repayment plan. Remember: Most reputable credit counseling organizations are nonprofits – check with your local credit union or even a university to find one that won’t overcharge you.