Published in: Banks | July 1, 2020
By: Maurie Backman
Despite an uptick in COVID-19 cases in some parts of the U.S., the country seems to be easing restrictions and opening back up on a whole. And that means small businesses -- many of which were shuttered earlier on in the pandemic -- are finally getting the green light to welcome customers again.
Supporting small businesses is important, because local establishments help communities thrive. It's estimated that for every $100 you spend at a small business, $68 gets to stay within the community. The reason? Small businesses tend to create local jobs and source supplies locally. By contrast, for every $100 you spend at a major retailer with locations nationwide, just $43 gets to stay in the community.
Local businesses also help homes in their community retain value. When neighborhoods have a thriving downtown with shops and stores, home values tend to rise or at least hold steady. When local establishments close their doors, home values can decline.
It's for these reasons that supporting small businesses is imperative -- now more so than ever. But what if you’re short on cash because of the ongoing crisis? What if you've lost income during the pandemic, or you’ve already dipped into your savings account to pay your bills? Should you allocate money to helping local businesses keep their doors open, or save every penny for your emergency fund?
There's a reason the $1,200 relief payments that went out to Americans as part of the CARES Act were called "stimulus" payments -- the hope was that people would use that money to stimulate the economy. And right now, small businesses need an influx of cash. But while it certainly pays to spend money at local establishments over national chains, you shouldn't spend money you can't afford to part with.
Take a look at your income, expenses, and savings. Are you keeping up with your essential bills based on your current paycheck, whether it comes from work or in the form of unemployment benefits? Are you able to make any credit card payments you may be on the hook for -- and if so, can you swing your full payments, and not just the minimum?
Make sure you’re not only covering your near-term bills, but setting money aside for upcoming bills. Don’t forget insurance payments, professional license renewals, or other irregular expenses.
And do you have at least three months' worth of living expenses socked away in an emergency fund? Your emergency fund needs to cover your essential expenses during this period of time, and these include:
Note that while your emergency fund technically only needs to cover essentials, you may want to build in a little more to cover expenses that are key to your sanity. A streaming service, for example, is something you can technically survive without, but that modest investment could make life more pleasant during an otherwise difficult time.
If you’re staying afloat financially and still have income left over, then you should make a concerted effort to pump some money into local businesses.
Supporting small businesses doesn't mean spending money on things you don't want or need. Rather, think about the things you do need and how local establishments can provide them.
For example, if you have kids who are outgrowing their clothing or need new attire for summer, support a local shop rather than a chain. You might spend a little more, but the quality may be better.
If you typically buy a few books each month, purchase them from a local bookstore.
And if you have the means, buy gift cards to area businesses. Right now, a lot of small businesses just plain need cash to stay open -- so if you can provide some, do it. You can use the gift cards yourself over time, or give them to local family members or friends as birthday gifts.
If you're struggling to make ends meet, you shouldn't push yourself to support local businesses at your personal expense. What you can do, however, is support those establishments in ways that aren't monetary.
Write positive reviews of local businesses and share them on Facebook, Yelp, and Google. Talk up small businesses your friends may not have heard of. Share social media posts from your favorite family-owned restaurants and boutiques. And if there's a specific business you once frequented before the pandemic, make a point to pick up the phone and reassure the owner that you'll be back once your finances have improved.
It's noble to support small businesses at a time when every dollar counts. If you're in a strong enough financial position to do so, make it a priority to support local businesses as they reopen. And if you can't part with the money right now, don’t feel bad. Find other ways to help those businesses attract customers so they can continue to thrive and serve your community.
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