How to manage your post-pandemic spending
The pandemic has been a financially stressful time for many people. At the same time, spending less on commuting, travel, and entertainment has given some people’s finances a boost.
That’s playing out in the amount of money that people are socking away in their savings accounts. The most recent personal savings rate — the percentage of people’s disposable income that they are saving — is 13.6%, well above the usual 6-7%.
As vaccinations ramp up and restrictions wind down, you might be getting the urge to spread your spending wings a little more. Before you do, think about any changes you want to make to how you manage your money going forward. Here are some tips to get you started.
Look to the past
Now is a good chance to do a reset on your spending habits. Think about how you spent your money both before and during the pandemic and whether that’s the best plan for the future.
Consider what has changed in your life since the pandemic started and the impact it’s had on your financial picture. Maybe you’re no longer commuting and don’t need to spend much money on gas or public transportation. Maybe you’re cooking more at home and spending less on takeout. You might also want to save up for a bigger place if more remote work is in your future.
Now is also a good time to look at your banking setup, too. Consider if it would be helpful to open up a separate savings account to save for big goals or if you can have more of your paycheck automatically diverted to savings. You can also investigate bank accounts that earn more interest like high-yield savings accounts or money market accounts.
Create or revamp your budget
Having a budget is very useful to help manage your money. It doesn't have to be fancy — you can print out a worksheet, make a spreadsheet, or use a budgeting app like Mint or EveryDollar.
Write in all your necessary expenses like housing, food, utilities, and other bills. Then, factor in savings for an emergency fund — finance pros recommend saving three to six months of expenses — and savings goals for retirement or a big purchase like a car. Next, figure out how much income you have left over and how much you want to spend it in categories like clothing, entertainment, travel, and subscriptions.
“Look to your budget to see what you can afford to splurge on,” said budgeting expert Jamila Souffrant, a partner with credit union DCU and host of the Journey to Launch podcast. “Also understand that you don’t want to sabotage your financial security for temporary fun if you can’t afford it.”
Don’t forget about deals
Just because you have more spending cash doesn’t mean you should ditch all your thrifty habits. You can enjoy even more shopping, dining out, and gatherings with friends if you make good use of deals, coupons, and the rewards or travel points that might be languishing in your credit card account.
“Look for brunch specials or buy what’s on sale,” Souffrant said. “Check out local hotels or staycations in your area.”
With pent-up demand for travel, dining, and other experiences, prices may soar so hunting around for deals will become even more important.
Build up your future
If you’ve managed to save some extra cash during the pandemic, don’t forget to toss a little something to your future self. Contribute an extra 1% to your 401(k) or an extra $50 a month toward your emergency fund if you can, Souffrant said.
And remember, while it’s natural to want to get out there and start doing more, you can spread around the spending.
“You don’t have to do all the things at once and you can still budget and save money while having fun,” Souffrant said.
Read more information and tips in our Spending section
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