The ongoing pandemic has accelerated the adoption of a digital first economy where both businesses and the consumers they serve, have little option but to adapt quickly. Besides the obvious shift to an online world, consumer behaviour over the last months have ranged greatly from toilet paper hoarding to round-the-clock content consumption.
As governments and stakeholders made the necessary interventions to ensure supply chain resilience and that essentials remain available, the fear of shortage subsided. Consequently, consumers made a shift from panic mode to either of two broad categories - “utilitarian” motivations (an urge to purchase only the bare necessities) or “hedonistic” fulfilment (the need for instant gratification).
Utilitarian motivation is somewhat driven by a pessimistic stance. Consumers in this category are worried about the economic impact of the health crises and are likely to save as much as they can; choosing only to spend on the absolutely necessities such as rent, education, utilities, healthcare, sanitizers, and grocery (including household cleaning items and canned food).
Hedonistic fulfilment, on the other hand, arises from a more optimistic outlook. Consumers in this category, though somewhat worried about the economic prospects, still choose to consume nonessentials such as entertainment, books, electronics, and home improvement. With lockdowns imposed and work from home encouraged, a lot have also started investing in bread makers and fitness equipment as ways to maintain their physical and mental fitness. Interestingly, Amazon reported that the most searched item these days is jigsaw puzzles for adults.
Irrespective of the category you fall into, only purchasing essential items out of fear can cause further anxiety while spending frivolously is not always prudent. We can agree that there is a need to find a balance. So, how can you ensure that you are money wise during this uncertain time?
Creating a budget and sticking to it is now more important than ever. You should be re-evaluating your spending habits. Use this opportunity to identify the absolute necessities, the nice to haves, and the unnecessary. Because these are unpredictable times, it is particularly advisable to store up a huge cash reserve. You can build this either by saving in a high interest savings account or fixed deposit. There are plenty of apps available that can make this process less tedious and help you stay on track to meet your financial goals.