​The coronavirus pandemic has shifted how Americans spent money this year. A recent Bank of America survey of more than 2,500 adults found that 64% changed their spending habits since the start of the pandemic. Instead of splurging on dinners out and vacations, consumers poured more money into their at-home lives, spending more on food and entertainment that could be enjoyed without leaving the house. Here’s a look back at what Americans spent money on in 2020.

Groceries:
The majority of Americans — 85% — said they have been spending more on groceries in 2020, an August survey found. Consumers spent an average of $139 per week on groceries since the start of the pandemic.

Cleaning Products:
Americans loaded up on disinfecting wipes and sprays this year. A TD Ameritrade survey conducted during the initial months of the pandemic found that 53% of Americans reported spending more on cleaning products than pre-pandemic, with the average extra spending at $92.

Takeout:
With restaurants in many places closed during initial lockdowns, Americans spent more on takeout this year. A survey about Americans’ takeout habits from March to July found that 65% had been ordering more takeout, with the average American ordering takeout 2.4 times a week. The average weekly spend on takeout was $67.

Candy and Snacks:
Takeout wasn’t the only food indulgence Americans enjoyed more of this year. The T survey found that 32% of Americans were spending more than usual on candy and snacks, with the average extra spend on these items at $64.

Streaming Services:
Nearly a third of Americans — 32% — reported spending more on streaming services. Those that spent more spent an average of $71 on streaming services that they were not paying for pre-pandemic. Netflix was one of the big winners of the streaming boom. The company reported that it added 28.1 million subscriptions in the first nine months of the year.

Home Entertainment:
Over a quarter of Americans — 26% — said they spent more on entertainment items, like books and video games, during the first months of the pandemic. Consumers spent an extra $92 on entertainment.

Hobbies:
With extra time on their hands, Americans took up new hobbies like painting and gardening. 24% of Americans reported an increase in spending on hobbies, with an average spending increase of $88.

Alcohol:
Sixty-four percent of Americans said they saved money during the initial months of the pandemic by not going out for drinks. However, some Americans increased their spending on alcohol to bring the bar experience home. Twenty-three percent of those surveyed said they spent more than usual on alcohol, with the average increase in spending at $124.

Electronics:
As Americans transitioned to working and learning from home, many needed to buy new tech products, like computers and tablets. 19% of Americans said they spent additional money on technology during the initial months of the pandemic, with the average increase in spending at $175.

That spending has stretched into more recent months, too. Best Buy recently reported its highest sales in 25 years for the fiscal quarter ending Oct. 31, CNN reported. Consumers have continued to buy laptops, home theater systems, kitchen appliances and other electronics as they spend more time at home. Best Buy’s sales increased by 23% compared to sales during the same period last year.

Charitable Donations and Gifts:
While many Americans suffered from job loss, those that were able to give gave more than usual during the initial months of the pandemic. The TD Ameritrade survey found that 19% of Americans increased their charitable donations, with the average extra contribution at $245.

The spirit of giving seems to have ramped up again in time for the holidays. A recent survey by the NPD Group found that 40% of consumers plan on buying more gifts this year to bring joy during challenging times.

Clothes:
With people stuck at home for weeks, some resorted to online shopping for clothes as a form of entertainment. 16% of Americans reported spending more shopping for fashion items online than pre-pandemic, with the average extra spend at $134.  However, the survey also found that the majority of Americans — 73% — were spending less on clothes than usual as a result of the pandemic.

Furniture and Home Décor:
As people spent more time at home, some decided it was time to upgrade their spaces. 12% of Americans reported increased spending on furniture and home decor, with the average additional spending at $255.

*The above mentioned surveys were conducted by T. D. Amertrade

The coronavirus pandemic has changed nearly every aspect of our financial lives. Many of us have lost jobs or work hours, seen our investments swing from highs to lows and changed the way we spend money, with many of our usual expenses (commuting, vacations, etc.) now off the table. With so much uncertainty still looming about how the pandemic will affect the economy going forward, it’s important to make smart financial moves that can weather whatever is to come.

While some golden rules of money management still stand, other advice has changed due to all the uncertainty we’ve been facing in recent months. I spoke to financial planners to find out what tips they’ve been giving their clients to ride out the current crisis and be prepared for whatever the future may hold. Keep reading to check out this advice for yourself.

Focus on What You Can Control: You can’t predict or control how the pandemic will impact the market. You can control how you manage your investments, your savings rate, having a financial plan and how you react to events.

Create a Budget to Maximize Your Resources: Creating and sticking to a budget is one financial tip that always applies; however, you may need to revisit your budget to account for any changes in your lifestyle due to the pandemic.  If you can, rethink your needs and wants, reprioritize your expenses and plan better for the future. Put what you don’t spend on ‘extras’ toward the future — whether that’s your emergency fund, retirement or education.

Keep Your Expenses Low: Managing expenses during this time is very important.  Job stability is a very big issue and can dramatically affect people’s lives. Living within one’s means is always a good practice — now is no exception and could potentially allow a family to reduce the negative impact of a job change.

Build an Emergency Fund: We don’t know how things are going to unfold or how long all of this will last, It’s smart to have a little extra cash on hand for these times. With so much volatility in the job market and the stock market, it’s important to be financially prepared for whatever crisis you may face.

An emergency fund helps make sure you can stay secure no matter what happens.
As a buffer, you ideally want to have enough cash handy to cover three to six months’ essential expenses. Figure out how much you can afford to put toward your emergency fund each month and have that amount automatically deposited in a savings account especially earmarked for that purpose. When you reach your goal, you can put these savings toward something else.

Remember that Emergency Funds are for Emergencies: You might be tempted to dip into your emergency savings to cover nonessential purchases but this is a mistake.
Consider your savings as you would your face during the pandemic: Don’t touch it!  

Take Advantage of Any Employee Benefits You May Have: If you’re still employed, make sure you are taking advantage of any employee benefits that may be offered to you. There’s probably hidden money in your paycheck. If you’re still lucky enough to work for a company that can afford to give you a 401(k) match in any dollar amount, take full advantage of that benefit. That 401(k) match is free money but you’ll only get it if you contribute.

Also evaluate healthcare-related benefits like HSA accounts.  Health Savings Accounts are the only savings vehicles that are triple tax-free. The money you contribute goes into the HSA account pretax, the funds grow tax-free and are tax-free when used to pay for healthcare expenses. You can also invest and grow these funds throughout your lifetime. Think of an HSA as an IRA for healthcare or medical spending. The money in the account gets invested and you can choose, depending on your provider, to invest in your favorite low-cost index funds or ETF.

Make an Investing Plan and Stick To It: Use any period of financial uncertainty to reassess your risk tolerance and confirm your investments are compatible with both your time horizon and risk tolerance. It’s easy to let your emotions get the best of you when it comes to investing, but you should avoid panic buying and selling. The urge to do something can be overwhelming, but this can often make things worse, either by selling too low immediately after a market downturn and missing out on future gains or by chasing performance after markets take off. 

Often, the Best Strategy is to do Nothing: A good financial plan is strategic but not written in stone, and it can evolve as your goals change. If you don’t have a financial plan, it’s not too late to create one. You can make one on your own or with an advisor.

Diversify Your Assets the Right Way: Diversification should be a part of your investing plan. Most people might think of diversification as it applies to traditional asset classes. That doesn’t accomplish what many think it does, since traditional asset classes are a broad category of their own,  For example, people might think of large- and small-cap domestic equities as being diversified, when the truth is that they’re highly correlated. For better diversification, look at assets like real estate, commodities, hard assets, foreign credit, long- and short-hedging strategies, and mergers and acquisitions arbitrage. It can be hard for individuals to access some of these, but the idea remains the same for the individual investor — seek opportunities outside of traditional asset classes.

Re-evaluate Any Fees You May Be Paying: Consider auditing all of your investments for extra fees that may be going out the window. Recapture that money into more efficient investments. Be sure to look at funds in your 401(k) plan and consider alternative options with better investment fees. This audit should also include your insurance, such as property insurance. Take a good evaluation of the premiums you are spending and be aware of where your money is going.

Abide by the 'Five-Day Rule:' Use the five-day rule to help differentiate between a need and a want, if you can go five days without buying something, it is a want, not a need. This will limit COVID at-home online shopping impulse buys that you may quickly regret.

Retirees Should Prepare for Short-Term Volatility: Retired individuals should have at least five years of their cash needs allocated in fixed income and/or cash equivalents to plan for short-term volatility. This is a suggestion that remains unchanged from before the pandemic but is even more important today.

Ask for Help: Pandemic or not, it’s always useful to get an outside opinion to ensure that your financial decisions are serving you.

Contact Brien and his team at Traditions Wealth Advisors. You don’t have to figure it all out on your own. Having an outside voice and perspective can help you to stay grounded and make clear confident decisions. Brien@TraditionsWealthAdvisors.com or 979-694-9100.

Philanthropy and giving is on most of our minds as we wrap up the pandemic year of 2020. Nonprofits need help now just to keep their doors open. New tax laws and strategies can help you maximize tax breaks for yourself and have benefits for the charity. Here's what you need to know:

1. New $300 charitable deduction for non-itemizers
2. Bunching contributions and donor-advised funds.
3. A double tax break from giving appreciated stock.
4. Make a tax-free transfer from your IRA.
5. Watch for scammers and make an extra effort to research charities this year.

New $300 Charitable Deduction
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, created several incentives for people to help charities right away, including a charitable deduction of up to $300 in 2020, even if you don't itemize. Otherwise, you generally need to itemize to take the charitable deduction. The CARES Act also helps people who are in a financial position to make very large gifts. In 2020, you can deduct cash gifts of up to 100% of your adjusted gross income, rather than the usual 60% limit. To qualify for this higher limit, the gifts must go directly to the charities, rather than to a donor-advised fund or private foundation. This can help wealthy people reduce their taxable income significantly in 2020, and it may also help retirees who have money to give but bump up against the income limits for the deduction.

Bunch Contributions and Donor-Advised Funds
Rather than making a steady stream of charitable contributions from year to year, it may be better to use a bunching strategy – give more and itemize in one year, and claim the standard deduction in other years. Even though this can help you tax-wise, you might not want to give all of the money to the charities at one time and then neglect them over the next few years. But bunching can work well if you have a donor-advised fund. These funds are offered by brokerage firms, banks and community foundations, and you can take the charitable deduction in the year you give the money to the donor-advised fund, but then you have an unlimited amount of time to decide which charities to support. Another benefit of the donor-advised fund is simplicity – you get one receipt for your tax records when you make the contribution and don't have to wait for a variety of paperwork from each of the charities. 

Give Appreciated Stock
Many people just write a check to the charity, but you may get a larger tax benefit if you give appreciated stock. If you owned the stock for more than a year, you can deduct the value of the stock on the date you give it to the charity if you itemize. And even if you don't itemize, you can avoid having to pay long-term capital gains taxes on your profits, which could have cost up to 20% if you sold the stock first. With so much stock market volatility this year, you may want to donate the stock when it reaches a target price, rather than giving at a certain time of year.

Tax-free IRA Transfer
People who are age 70½ and older can give up to $100,000 per year tax-free from their IRA to charity, a procedure called a qualified charitable distribution or QCD. The gift counts as their required minimum distribution but isn't included in their adjusted gross income.

Research Your Charities
Scam artists have been out in full force to take advantage of the coronavirus pandemic. It's even more important now to check out charities before you give money, especially if they contact you first. You can look up charities at sites such as Charity Navigator and the Better Business Bureau's Wise Giving Alliance. 

With so many options for giving, be sure to check with your financial advisor, Brien Smith, at Brien@traditionswealthadvisors.com or 979-694-9100, before finalizing your gift.
 
Source: Lankford, Kimberly. 21 August 2020. US News. https://money.usnews.com/money/personal-finance/taxes/articles/new-rules-for-charitable-giving