From buying gas for her 50-mile daily round trip commute from her Oxford home to lunch breaks that included restaurant meals, Loretta Ball’s pre-pandemic workdays featured a sneaky amount of spending.
But for the past two years, Ball has worked mostly from home, helping her move toward firmer financial footing. She’s applied her savings to credit card debt and her mortgage, and increased her retirement savings.
“You don’t really realize how much you’re spending each day,” said Ball, 56, a Duke HomeCare & Hospice Program Specialist. “When you don’t do those little things anymore, you look in your checking account, and you’ve got a little more in there.”
While the pandemic added an unwelcome dose of uncertainty, quarantines and lockdowns created opportunities for some to save money. But as life inches back to normal, and prices for essential purchases jump upward, the challenge facing many, including Ball, is how to keep financial progress going.
After initially surging as high as 33.8 percent in the pandemic’s first months, the personal savings rate – the percentage of monthly disposable income Americans save or invest – continued to stay higher than normal for more than a year into the pandemic. But starting last fall, that percentage returned to pre-pandemic levels. And this spring, the rate dropped to levels not seen since 2008.
Spurred by spikes in the price of gas and food, the Consumer Price Index on all goods rose by 8.3 percent between April 2021 and April 2022, adding another challenge to savings goals.
Alan Collins, a retirement planner with Fidelity, the primary record keeper for Duke’s Faculty and Staff Retirement Plan, said that smartest way to lock in financial discipline is through a monthly household budget. Ideally, around 50 percent of a household income should go to essential expenses with 15 percent, if possible, for retirement and 5 percent to emergencies.
With spending habits and prices in flux, it’s important to revisit your budget – and in the process, look at the past 90 days of spending to spot changes and see where money is going.
“There are usually some areas you can cut back on, such as monthly subscriptions, or dining out,” Collins said.
To keep building emergency savings, Margaret Bolton, a senior research scholar who studies behavioral economics at the Center for Advanced Hindsight at Duke, recommends automatic savings account deposits with each pay cycle.
“You don’t even have to think about it,” Bolton said. “Treat your emergency fund as non-discretionary. You need to have it.”