How to save even as you shop

Over the last six months, income-secure households have spent more on sporting equipment and beer, wine and liquor stores.
Over the last six months, income-secure households have spent more on sporting equipment and beer, wine and liquor stores.PHOTO: AFP

(BLOOMBERG) - You probably want to buy something. For many households, there is more money at the end of the month. Spending on restaurant meals and entertainment is way down. Excess income over spending is about 14 per cent - up from a 25-year average of 7 per cent to 8 per cent.

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

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. 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 wear only about 20 per cent of 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 adviser. A fiduciary, fee-only (not fee-based) financial adviser is legally bound to act in your best interest. Fee-based advisers are not fiduciaries; they receive commissions from the products they sell.

A fee-only adviser can offer only products that serve your best interest. One with a Certified Financial Planner credential has that extra education and experience requirements to better address holistic financial needs. Robo advisers 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. Saving mistakes are often attributed to the wiring of the human brain, but only a small share of us are shopping addicts. About 8 per cent 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. 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 labour market.

More people left the workforce than were new jobs created last month. Pay increases are not happening any time soon with rising permanent layoffs. For those who report not having enough to eat, 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.

• Teresa Ghilarducci is the Schwartz Professor of Economics at the New School for Social Research. She is the co-author of Rescuing Retirement and a member of the board of directors of the Economic Policy Institute.