With home buying seeing all-time highs while travel is at a standstill, there is no question COVID-19 has had a drastic impact on our behaviors and routines. But more importantly, this year’s pandemic is redefining our true wants vs. needs. This new wave of pandemic spending habits is starting to uncover the dramatic ways Americans are dealing with the crisis and the impact it’s having on our wallets.

While we may all still be daydreaming of when we’ll be able to put our “vacation funds” to good use, how has our pandemic spending habits changed in the past few months and which businesses are seeing a boost in sales as a result?

The Personal Capital team saw spikes and trends from transaction activity on the Dashboard during the months of March through the end of July around top categories and merchants both pre and post COVID-19. Taking a look at what categories were at the top before March 2020 and comparing it to the top categories at the end of July (in the middle of the pandemic) you can see in the illustration below some of the dramatic shifts.

As you’ll see in the illustration above, the top discretionary spending categories from last year up until Feb 2020 were as follows (in order from 1-5): Travel, Other Expenses, Restaurants, General Merchandise and Groceries. Looking at the results – it’s clear that before the pandemic, Americans loved to travel and spent a large share of their money doing so. It’s important to note that the category “Travel” as a whole is defined as everything from airline, taxis/car-sharing (Uber and Lyft), hotel accommodations and more.

When you look at Travel as a category from March through the end of July 2020, you can see that the category saw a dramatic drop, moving to the #6 category in total discretionary spending (for obvious reasons as the shelter in place mandates resulted in many of us not being able to travel).

So what did American consumers replace as the top category during the pandemic? It’s clear that general merchandise and groceries jumped to the top spots (1 and 2 respectively) as many Americans are now spending more time at home and stocking up on supplies (aka the great toilet paper shortage of 2020). “It’s natural to want to feel prepared during a crisis and the COVID-19 pandemic definitely fueled this so-called “panic buying” craze during the early months of the pandemic,” said Kyle Ryan, Executive Vice President of Advisory Services.

According to the Bureau of Labor Statistics, over half of Americans (59%) who received stimulus checks spent them to pay for daily expenses like food and rent.

One interesting category to compare was “Restaurants” as it was the only category to remain unchanged in the same #3 spot both pre-COVID-19 and during COVID-19 time periods. This could be a result of the quick pivot restaurants made to keep their businesses afloat, offering “take-out” only menus, expanding their delivery routes and more Americans ordering out to help keep their favorite restaurants afloat. Whatever the reason, it’s clear we are still enjoying our Friday night pizza habits even in quarantine.

Another interesting trend we saw was the increase in spending on Home Improvement during the pandemic. It’s clear that a lot of homeowners took advantage of the shelter in place mandates to spruce up their gardens and outdoor spaces, or finally tackle those painting projects around the house! Home Improvement as a category rose to the 4th spot at the end of July.

Grocery Delivery Services Were Clear Winners

Shown in the below charts, both restaurant delivery companies along with general merchandise suppliers were obviously clear winners to the shelter in place mandates. Grocery delivery companies such as Instacart saw spikes of 428% growth rates in transactions at the end of July. Amazon saw transaction spikes during the month of May through July that were near Black Friday levels!

Here’s a snapshot of the growth rate by merchants taken at the end of July:

With advantages to Amazon’s already 2-day prime shipping and our increase in general merchandise spending, the delivery company saw a huge increase during the pandemic causing delays and inventory shortages due to high demand.

On the bottom, we saw car-sharing services such as Uber and Lyft struggle with stagnant growth levels during March through the end of July. As more states are starting to open their economies up and people start to venture back out, we hope this will return to normal levels seen pre COVID-19.

How to stick to your budget during a pandemic

Creating and sticking to a budget is one of the smartest things you can do financially, but especially during a time of crisis or in this case a pandemic. Money coach Tori Dunlap, recently wrote an article on “The Three Bucket Budget” providing tips for how to use this simplified system to track your expenses, goals, and everything else. She said it helped her reach her saving goal of saving $100K by age 25.

Here’s a quick overview of Tori’s budgeting system and how she splits up her money into 3 distinct buckets (you can read the full details here).

Bucket 1: The essentials – this money is for the expenses in your life that you need to eat, live, breathe and ALL things survival. Think monthly rent, grocery expenses, utilities, and insurance payments when you’re creating your expense budget. Loan and credit card payments belong in this category too.

Bucket 2: The big life goals – these goals range from making sure to have emergency savings, setting aside money to pay off debt, and investing for retirement. Once those initial categories are taken care of, you can start thinking about other big life goals such as how you are going to save for a downpayment for a house.

Bucket 3: The “fun” money – The last bucket is for fun spending — aka your Netflix subscription, dinners out, and Weird Al tickets. Spending doesn’t mean deprivation. There are certain things in life that bring us true joy and happiness. For example, I really enjoy spending money on food, travel, and nesting. So long as I’m contributing money into my other two buckets, I feel guilt-free spending on these last few items.

One you have your buckets in place, be sure to utilize the Personal Capital Dashboard and expense tracker to help track your spending in real-time. Once you have aggregated your financial accounts – the Dashboard will analyze your spending, cash flows and allows you to see where you might be spending too much and where you can adjust accordingly.

Additionally, the Expenses Tracker feature also allows you to add tags to every expense that you have which makes using the Three Bucket Budget even more intuitive. Simply label your expenses by each of the bucket categories. You can be as specific as you like during your spending labeling process.

Conclusion

Regardless if we are in a pandemic or not, it is important to make sure you are regularly checking in with what’s going on with your spending and make it part of your financial hygiene. Having these basic budgeting methods in place means that you have the knowledge of how much money you’re bringing in and how much is going out — so you can make more informed choices on where to spend your money… wisely.