Given the challenges of pandemic life, many financial tasks may have taken a back seat this year as we all tried to get through every day. At the same time, the pandemic has had a huge impact on our financial lives and some money-related chores are probably fine.
Now that it’s spring, it’s a good time to do a thorough financial review and address any neglected areas. Here’s how to clean your finances in the spring after a year of living in a pandemic.
1. Update your budget
Their spending patterns may have changed radically over the past year: according to the St. Louis Federal Reserve Bank, spending on travel, hotels, restaurants, and bars fell during the pandemic, while spending on grocery and beverage stores rose.
So it might be time to create a new budget that reflects ongoing expenses, says Curtis Bailey, certified financial planner and founder of Quiet Wealth Management in Cincinnati. “Covid changed spending patterns over the past year and may well continue to do so,” he says. He suggests anticipating what habits you might want to continue beyond the pandemic and avoiding drastic changes like buying a second home until you’ve done a thorough analysis of your future needs.
Shea Newton, CFP and President of Financial Journey in Leesburg, Virginia, recommends diverting some of these previous expenses to an emergency savings account. Some people, she says, may want to replenish theirs Emergency fund After diving into the last year or climbing to a higher level, given the income insecurity many people continue to experience.
2. Set new financial goals
With the pandemic in view, you may want to set yourself new financial goals, such as: For example, you can finally go on a big vacation or find a job where you can continue working from home. “Perhaps you are staggering and trying to find your way out. Ask yourself what is really important and whether your current spending reflects that, suggests Andrew Mitchell, CFP and financial advisor at Fiduciary Financial Advisors in Grand Rapids, Michigan. If you want to go on a big trip, but most of your expenses are currently being used for daily expenses, you may need to adjust your budget.
Mitchell also suggests wondering if you are prepared for the next disaster. Looking back, do you wish you had a larger savings fund or more diversified investments by 2020? Thinking about these questions can help you set new goals that will help you meet the next challenge, he says whenever it arrives.
3. Check your insurance coverage
The pandemic has had a big impact on our homes: not only do we spend more time in them, often with more expensive technology and other things that help us work or go to school from home, but property prices have also increased. Housing prices rose 10.8% between the fourth quarter of 2019 and 2020, according to the Federal Housing Finance Agency. You may need more insurance coverage than you currently have, says Noah Damsky, director of Marina Wealth Advisors in Los Angeles.
The cost of building materials has also increased, meaning replacing a damaged house would cost more, he adds. His company recently helped one of their clients increase home coverage by 40% to better reflect how much it would cost to rebuild the home today.
Damsky also recommends increasing coverage for water damage. “As we spend more time at home, we are likely to use water more often and the potential for installation problems increases.” When renting, the renter’s insurance is vital. Homes are at a higher risk of flood damage because so many people at home put a strain on shared infrastructure, he says.
4. Optimize subscriptions
Because of the time spent at home, many families increased their spending on subscription services like Disney +, Netflix, and HBO. When we all start getting more out of the house, it might be time to cut the girth, suggests Jason Dall’Acqua, CFP and president of Crest Wealth Advisors in Annapolis, Maryland. “Cancel the subscription services that you don’t use very often and realign your budget under normal circumstances,” he says.
5. Update your credit card
If your spending patterns have changed, you may want to, too Consider a new credit card this will better maximize your current lifestyle. Bailey suggests that you log into your credit card accounts first and see a summary of what you have spent over the past year, as well as the rewards you’ve earned.
Have you maximized your earning potential and redeemed these rewards in valuable ways? If you spend a lot on takeaway or dining, but your current credit cards aren’t rewarding you for the expenses, it may be time to do so Apply for a new card that does this, he says.
6. Zero the mobile app credits
Given the increasing popularity of payment apps like Venmo, PayPal, and Cash App, it’s a good idea to check your balance: NerdWallet found that around two-thirds of mobile payment app users report this a balance is kept in their accountsThat is, they don’t earn interest on that money. Instead, consider transferring your money to a high-yield savings account.
“Interest rates are currently low, but if you get into the habit of transferring money to your savings account, you will see more of an impact as interest rates go up,” says Newton.