It took a pandemic to do what infinite personal finance advice never could.

Successive economic lockdowns have boxed people into spending less than they make by a big margin. We’re living below our means, which is life’s ideal state from a personal finance view.

With major progress being made in getting people vaccinated, it’s time to look at how this might change as the pandemic recedes. The biggest risk to our finances going forward: Spending surges that undo all the good work done in the past year by those of us fortunate enough to have kept their jobs and income through the fight against COVID-19.

The No. 1 rule for postpandemic spending is to avoid financial entanglements. Try not to use pandemic savings as a down payment on a splurge that requires a big loan or a drawdown of your line of credit. Pay cash, or stay home.

One of most consistent economic patterns of the past 60 years or so is that household income and disposable income move more or less in unison, TD Economics noted in a report summing up consumption trends in 2020. Until the pandemic, that is. Incomes were $40-billion above household spending in the third quarter of last year, a level that TD pegged at 10 times the historical average.

There will be two competing urges as the economy opens – to live and spend large, and to keep saving at the elevated levels of the past year. A prediction: Among those not financially damaged in the past year, the needle will swing to spending. Expect to hear a lot of the term YOLO – you only live once.

We’ve already seen some niche spending booms during the pandemic in the form of household renovations. If you’re starting a project, you know all about the shortage of materials and soaring prices.

As the pandemic ebbs, expect a similar pattern in other forms of spending for enjoyment. Call it luxury inflation – rising prices for cruises and other international travel, premium concerts and events, restaurants and bars.

People will complain about rising prices in these areas and then they’ll pay up. After the past year’s off-and-on lockdowns, freedom to be out in the world is worth almost any price.

TD Economics has estimated that Canadians built up as much as $200-billion more in savings last year than they would have without the pandemic. There’s a lot of money to go around – to pay down debt, to top up Plan B funds for emergencies, to donate to charity, to backfill tax-free savings accounts and to spend frivolously.

The economy needs you to spend on goods and services, and your emotional health may benefit as well. Don’t underestimate retail therapy as a short-term stimulant, a kind of personal finance version of sugar. But it’s easy to see some people going too far with the spending boom ahead.

The housing market is the most obvious spending trap. House prices were inflated to extreme levels by people who urgently wanted bigger homes to accommodate pandemic life. The next wave of buyers, including people deploying pandemic savings as down payment money, will be getting into the market at astronomically high prices.

Mortgage rates are still close to their pandemic lows, but they’re expected to rise in the years ahead. Today’s buyers should expect to renew at higher rates that threaten to soak up any household income gains ahead.

Find affordable splurges, where possible. For travel, book something that won’t leave you with a balance on your credit card or line of credit. I hear Cleveland is nice.

If you’re buying a vehicle, avoid bracket creep. That’s where you use a bigger than usual down payment to buy something in a higher cost bracket than you’re used to and end up with a bigger loan than ever.

One last thought is to keep an element of nimbleness in your finances in the months ahead. Many things have not gone as expected in the past year and the path to postpandemic normalcy may bring more surprises. You’ll ride any disruptions ahead better if you splurge with restraint.

The Globe and Mail, May 25, 2021