How a Value Test Can Strengthen Your Financial Life

I've received the first shot of my COVID vaccine, and have an appointment for the second dose.  I imagine many of you have already been vaccinated or are anticipating your opportunity soon.  So – fingers crossed – we may be coming to the end of the COVID era.

But not everyone is feeling hopeful.  According to a Pew Research poll conducted this January, 44% of Americans predict it will take at least three years to recover economically from the pandemic.  Approximately 10% believe their financial situation will never recover.

The gift of clarity

Most of us saw significant changes to our spending during the COVID era.  Perhaps we experienced a loss of income, or had less opportunity to spend because of the closure of services and businesses.  Maybe we stopped commuting and paying for child care.  Or maybe we did more online shopping, especially when we felt sad or bored.

So much has changed in the past thirteen months, and so many things we took for granted have been overturned.  But the tragedy of COVID holds some seeds of opportunity, and one of those is the gift of clarity.

Now's our chance to consider what really matters and what doesn't.

Time to investigate

Start by pulling some bank or credit card statements from recent months, and also from the months just before COVID impacted our lives.

Consider, from your current perspective, which of those expenses are actually meaningful.  

• Which ones brought value into your life?  
• Which ones added something worthwhile but could have been substituted with a less expensive alternative?  
• Are there any that you vividly remember?  
• Which ones have you forgotten because they're truly unmemorable?

Here are some examples from my own experience:

• When I looked at my Amazon order history for 2020, I was dismayed to find that I had completely forgotten about nearly one-third of the items I ordered during the initial COVID lockdown between March and May.  That's a large number of items I didn't apparently need or want but paid for anyway.  And think of all the waste involved in packing and shipping stuff that added no value to my life.  Obviously, I need to be aware of and take steps to control emotional shopping.

• My husband and I have always enjoyed eating out, even though it can get very expensive.  We still ordered plenty of takeout food during COVID restrictions, but got into the habit of buying one entrée to split, making salad at home, and either drinking water or brewing some tea (hot or iced).  We never ordered a takeout dessert – if we wanted something sweet we had a scoop of premium-quality ice cream from our freezer.  (The entire quart costs less than one restaurant dessert.)  We saved a lot of money this way, and there's no reason why we can't do the same as we begin to visit our favorite restaurants once again.  We can each order soup or salad to start, split an entrée, and drink water or iced tea.  We'll enjoy the dining out experience for much less money, even if we tip generously.

• We haven't been out to a movie for over a year, even though we used to go approximately once a month.  I realize now that there are actually only two or three movies from 2020 that we would really have enjoyed seeing on the big screen.  The rest of the time we would have gone to the theater (and ordered popcorn and soft drinks) simply as a way to "go out," not because the movie we were seeing was particularly memorable or high-quality.  We can save money and have just as much enjoyment from taking a walk, reading a book, or streaming an old movie, just as we did in the COVID era, saving the movie theater experience for something special.

How to improve your financial future

To keep moving in a positive direction, we need to permanently downsize spending that doesn't add value to our lives.  As things reopen and opportunities present themselves, we shouldn't simply dive back into the way things used to be.

In other words, don't bring back the low-value expenses.  Keep the ones that are essential for daily life and the ones that are meaningful, and trim away everything else.

A well-crafted value test lets you

• target your spending on things that are particularly enjoyable and important for you
• gain just as much satisfaction (or even more) while you spend less
• direct the money you save toward goals that make you more secure and confident

If you decide to do this, be a bit ruthless at first.  If you find yourself feeling unhappy or miserly, figure out exactly what you're missing and bring that back into your spending plan.  Using a value test should create margin in your monthly budget for building an emergency fund, paying off debt, or repaying what you may have borrowed from your retirement account to make ends meet in 2020.

If you avoid bringing back frivolous spending from your pre-COVID life, you'll have more money for other things you find more worthwhile.  You'll have more stability and hope for your financial recovery.

A value test can help you fund a life that truly makes you happy.

Updated May 2023