Personal Finance: Should I Shop or Save Money in a Pandemic?

Laveta Brigham

Teresa Ghilarducci is the Schwartz Professor of Economics at the New School for Social Research. She’s the co-author of “Rescuing Retirement” and a member of the board of directors of the Economic Policy Institute. Read more opinion Chances are you don’t really need new shoes right now. Photographer: Rafael Henrique/SOPA […]

Chances are you don’t really need new shoes right now.

Photographer: Rafael Henrique/SOPA Images/LightRocket/Getty Images

You probably want to buy something.

For many households, there is more money at the end of the month. Spending is way down on restaurant meals and entertainment. Excess income over spending is about 14% — up from a 25-year average of 7-8%.

To be sure, online shopping is up. And over the last six months, income-secure households have spent more on sporting equipment (up 29% from last year) and beer, wine and liquor stores (up 22%).

But I am guessing as the pandemic drags on, the boomlet for gardening and home office equipment, furniture, pandemic puppies and other nesting items may wane. You can only buy so many kitchen gadgets. And online buying may be a fleeting relief from the pandemic blues.

But the urge to buy something doesn’t go away. So, if you’re one of the lucky people with a job, enough to eat and a place to live, what should you buy in a pandemic?

First, buy a picture frame. Now print out a bank statement showing you saved money. Put it in the picture frame. Make saving the new status good — flaunt it like a golf club.

Second, satisfy shopping urges by getting anything you want at the thrift store — go wild. Much of the experience will be like regular shopping. You get the same thrill of the hunt. You may not use most of what you buy, but most of us only wear about 20% our clothes anyway. You might as well spend less on the clothes you don’t wear.

Third, buy a book about how advertising manipulates people into buying stuff they don’t need.

Fourth, buy an hour with a fee-for-service financial advisor. A fiduciary, fee-only (not fee-based) financial advisor is legally bound to act in your best interest. Fee-based advisors are not fiduciaries; they receive commissions from the products they sell. A fee-only adviser can only offer products that serve your best interest. One with a Certified Financial Planner (CFP) credential means they have extra education and experience requirements to better address holistic financial needs. Organizations that can help you search for a fee-only advisor in your area include the National Association of Personal Financial Advisors. Robo advisors may help those with limited budgets.

The bottom line is that both robot and person will probably tell you the same thing: Save more.

Look, I know that getting advice to save more has roughly the same effect as advice to eat less. The point here isn’t to produce shopping-shaming to go along with fat-shaming.

And I don’t mean to imply that a failure to save is your fault. Too often, saving mistakes are often attributed to the wiring of the human brain, but only a small share of us are shopping addicts. About 8% of the public are pathological shoppers preoccupied with shopping or suffering from buyer’s remorse. Experiments using PET technology have linked compulsive buying with specific Internet addictions or a predisposition to shopping-induced excitability. That means only a few of us truly lose control over our spending, whether because we are pleasure seeking, escaping negative emotions or can’t self-regulate.

More often, a failure to save can be attributed to not having enough wages. Wages have stagnated since 1983. When people have too much debt and not enough savings, it is unfair to blame human nature and not the reality of extreme inequality in the labor market or the racial wealth gap faced by Latinx and Black families.

If the pandemic has you, at last, in the fortunate position of having some extra cash burning a hole in your pocket, consider yourself lucky — and save up.

Planning for security is the only rational thing to do in the face of the continuing bad news. We are losing momentum in the labor market. More people left the workforce than were new jobs created in September. Pay increases are not happening any time soon with rising permanent layoffs. Over 18 million of 15% of Americans report not having enough to eat — for them, the issue is not “what” to buy, but “how.”

Orient your pandemic buying to those things that may add to your security and savings. Buy a cushion, not a crutch. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Teresa Ghilarducci at [email protected]

To contact the editor responsible for this story:
Sarah Green Carmichael at [email protected]

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