Ask The Experts: How To Manage Spending With The World Reopening

I’m fond of treating myself. Any excuse, and I’m sold. So much so that I’ve actually spoke about it in previous issues of STELLAR. From my love for dupes when I was young and desperately trying to follow every trend, to my heartbreak last year when the hight street looked more like a ghost town than the highlight of my weekly social calendar. My love for shopping has been ever preset in my life, but throughout the pandemic, like many, it has changed significantly.

With the dependence on e-commerce peaking, as brick and mortar shops had to close their doors for the foreseeable and either adapt to the online space or look at shutting indefinitely, our reliance on online shopping equally hit an all time high. According to data from the Central Statistics Office, almost seven in ten internet users purchased goods and/or services online in 2020, with six in ten of these internet users buying clothing, shoes or accessories online. These statistics showed an increase in not only the number of people shopping, but the frequency in purchases being made compared to the CSO statistics from the previous year in 2019.

Despite the country being in lockdown, with the government putting measures in place that required people to stay at home except for essential shopping or emergency journeys, people continued to buy clothes, and lots of them. Getting to shop in actual stores was replaced by hours spent scrolling online, flexing a different form of retail therapy, and shopping in the hopes of being able to wear these cute dresses and shoes to some place nice soon. It brought optimism and the instant gratification of being able to click checkout and then days later, receive a parcel to the door had people feeling a high that they wanted to experience again and again. Even if it meant the new top’s first outing was to buy bread and toilet roll in Tesco, it still sparked a little joy.

For many, the increase in online shopping was down to having more money to spend on discretionary items. With no socialising, no nights out and no holidays, people spent more time and money online. Irish online retail sales grew by 159% in 2020, up from average annual growth of 32% between 2017 and 2019, reports new figures from digital agency Wolfgang Digital. As time progressed during lockdown and people began to develop a new habit for shopping online or treating themselves to congratulatory packages for making it through another week, the rise in sales for luxury apparel also stated to grow. Farfetch, an online shopping platform that provides access to many of the world’s most expensive brands including Fendi, Gucci, Prada and Thom Browne reports that the company has added 900,000 customers in the two recent quarters. Explaining that the growth is due to people being more comfortable with shopping for designer items online, José Neves, the founder and CEO of Farfetch said that he believes the “complete paradigm shift” will last beyond the pandemic. Speaking in a forecast report for the company last November, Neves added that online luxury sales are on the rise and that over the next five years, it’s growth could “be north of 30% to 35%” of all sales in that retail category.

With shoppers also having the option to browse various websites, compare prices, get enticed by banners saying “free delivery” and “easy returns”, it’s easy to see how items – including luxury-  can seem in more of an arm’s reach online then in a physical store. Since the pandemic, people are also less bothered about trying clothing on, if it fits, success and if it doesn’t, it can be returned online. It’s the willingness to actually take the chance and shop online that retailers are starting to notice in the changing behaviours of consumers, and it’s something that was also highlighted by Neves.

 

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As my dad recently joked “the estate feels like retail rush hour in the morning,” with delivery vans from DPD to DHL, Fastway and An Post all whizzing past each other dropping off parcels to various houses day in, day out over the past year. And if my dad’s spotting it, then it’s certainly clear that people across Ireland have noticed the hike in online shopping, whether they’re doing it themselves or bystanders to their family and friends new spending habits. But the question is, with things gradually returning to “normal” and the world slowly opening back up, will we see another shift in the way we online shop? And most importantly, how should we manage our finances to deal with the mass reopening?

Well, Darren Nolan, head of financial planning and wealth management at Pax Financial Planning & AskPaul is here to shed some light. Explaining that there’s no time like the present to take a look at your finances, especially in line with the country opening back up and expenditure set to increase once again, Darren says: “Everyone needs a financial plan and that’s the most understated statement you’ll ever hear. It doesn’t matter whether you’re starting your career, in the middle, or even retired, it’s never too late to start developing strong positive financial behaviours.” Giving some tips on what you can start doing today, Darren adds, “analyse your bank statements, make sure you’re fully aware of what’s going out. Once you are aware – awareness is so key – then you can understand where you’re situated. So, for instance, your income is X amount and then Y is your total outgoings,” he adds. “Even if you’ve gone crazy spending in the last 12 to 18 months, just put it down and at least you know where you are.”

Continuing, Darren notes that once you’ve had a look at how you’ve been spending, it’s on to the next step. “Now it’s time to dissect, and put in place a financial plan. However, you need to bare in mind, if there’s debt out there, such as overdrafts and credit cards that are not being cleared on a month to month basis, they need to be addressed and put into the plan too.”

So how should we breakdown our financial plan? “First you need to cover your general living costs. From there, you move on to the debt scenario, if there’s personal debt outstanding – this is to try and move towards being debt free. And finally, it’s all about trying to get that surplus discretionary spend – not to spend it all, but to have a balance between living your life, as well as trying to get some of that money working for you, like building an emergency fund and having savings,” explains Darren.

Highlighting that he believes it’s important for people to start living their best lives and enjoying their money now, Darren is also an expert on knowing how much sweeter those times can be “when you spend knowing that it’s OK and that it doesn’t upset your financial plan.” The take home message? “Everyone needs a financial plan, it’s never too late and it’s all about being aware,” concludes Darren.

So, what does the future look like for our spending habits? Will the convenience of the online world continue to push us to shop from our screens? Or will we cut back on purchasing to make room for our soon-to-boom-again social calendars? It’s hard to say, but whatever the case may be, this was certainly the subtle nudge I needed to plan ahead.

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