How to ease back into spending as the world reopens

A recent CIBC poll found that the number one thing Canadians plan to spend their savings on is travel — approximately 32% of us. If that includes you, keep these tips in mind:

• Thoroughly research the location’s specific travel restrictions and be prepared for what’s required
• If applicable, carry your proof of vaccination with you even when travelling domestically 
• Book your trip sooner rather than later as prices will likely go up with increased demand 
• If you’re flying, plan for extra time in airport queues if COVID-19 tests are required 
• Seriously consider opting for travel insurance, even more so now than before
• Enlist the help of a travel agent. Not only can they help you find deals, they can also support you if things change last minute, and flag any travel restrictions. 

The CIBC poll also found that 28% of respondents plan to put savings towards investing, and 27% plan to build their emergency funds.

Investing for a long-term goal makes smart financial sense. You could be saving for a goal like retirement, so those additional savings could go towards a more lavish retirement. And by investing for the long-term, you’re giving your money a chance to ride out the market ups and downs which will inevitably happen. On the flip side, you could be investing for a shorter-term goal like a down payment on your first home. Investing can nudge your savings to grow till you’re ready for them.

Emergency funds on the other hand should be readily available and liquid, meaning quickly and easily converted to cash. A proper emergency fund should have enough to cover your living expenses for a period of time where your cash inflows could be compromised. For example, if someone loses their job that covers basic living expenses of $2,000 per month, and they estimate it will take 3 months to find a new job, then they would need $6,000 in their emergency fund. As the pandemic has shown us, being prepared for the unexpected is key.

The key to splurging smartly is to come prepared with a plan. Follow these 3 steps to set yourself up for success. 

1. Create a budget

Remember that as the world reopens, your normal day-to-day spending will likely increase as well. So build a budget for the next few months to find out how your cash inflows and outflows may change just from the day-to-day items. Get a sense of how much excess cash you’ll realistically have.

2. Consider areas to cut back and know your spending patterns

Now that’s you’ve identified the areas where spending could go up naturally, are there areas you could cut back on? For example, if you’ve acquired additional streaming services over the course of the pandemic, could you cancel some if you plan to use them less?

It’s also helpful to identify your spending patterns and how they may change as stores re-open. If you were shopping primarily online through the pandemic, and now you layer on in-store shopping, that could significantly impact your budget. Be aware of your habits and plan your discretionary spending accordingly.

3. Cost out the big ticket items where you plan to spend

Identify the top one or 2 items you’d like to spend your savings on and estimate their cost in as much detail as possible. For example, travelling costs may include the transportation, food and beverages, accommodations and activities. Check real-time prices for these items too, as they could go up along with the demand.

Next, set a limit for how much you’d like to spend on those big ticket items and write it down. Hold yourself to this limit as well as your budget from step one. For additional help sticking to your budget, there are budgeting apps that notify you when you’re getting close to going over.

Breaking free

It’s an exciting time, and we’re all eager to return to normal life, but don’t feel the need to rush into any spending decisions. Take a little time to compare prices across multiple places and make sure the costs align with what you budgeted. Making smart spending decisions now can set the stage for continued good financial habits going forward.