Imagine driving deep into your car and never looking in the rearview mirror. Vaccines, travel and the hope of normalcy are finally on the horizon.
With so much to look forward to in the future, it’s understandable not to want to look back.
However, the return to typical everyday life will be a transition. And from a financial point of view, you want to evaluate your past Budgeting behavior to prepare for more normal days.
Review past and current issues
Last year’s editions didn’t look like 2019. And 2021 will not look like 2020 or 2019. However, you will need these historical insights to inform your future expenses, especially if you start reintroducing expenses that used to be common, such as B. Concerts tickets, plane tickets and so on.
Some people’s spending has decreased dramatically over the past year (either by necessity or by choice). Others, however, have struggled with comparable costs, says Molly Laughter, certified financial planner and founder of Laughter Financial LLC in Dallas.
Do you remember the jungle gym the kids can play in in the backyard? Or the Xbox for long nights of video games? It might have been a great way to keep you busy and comfortable at home, but now you need to find a way to balance these newer expenses with your previous expenses for the activities you want to return to.
With many of us already scrutinizing our finances as we file taxes, Laughter suggests taking this opportunity to review the year-end financial summaries from your credit cards and bank accounts.
Size of each category. How much did you spend? Was it worth that amount? Do you want to keep spending that much?
Since COVID-19 became part of our vocabulary, there was talk that life would never be normal again. Laughter assumes that your future expenses will be a “new normal”. Sure, you can add dinner – and possibly even an outing – into the mix, but expect to keep paying for quarantine staples like supplies and home activities.
According to Vid Ponnapalli, CFP and owner of Unique Financial Advisors based in Holmdel, New Jersey, there will be a paradigm shift in how budgeting compares in the future compared to pre-COVID.
This new balance means that you have to play favorites with your finances. After all, you can’t hold the amount you spent on home entertainment and food deliveries while increasing the amount you spend on indoor meals and live shows. It just won’t stop there fit into the budget. Pick the expenses that will benefit you the most.
To make the necessary adjustments, Laughter suggests looking at the bigger picture. Don’t get too involved with certain line items. (For example, if you’re spending 25% less on grocery orders, you don’t need to divert that exact amount to dinner.)
Once your needs and savings are taken into account, instead, set a dollar that you can afford discretionary spending each month and then spend it on whatever you want. You may never add back some things that you used to spend money on.
As Ponnapalli says, we all found something new Ways To Spend Less Money and still have fun. When you drop thousands of dollars on concert tickets, it may no longer be worth watching a (much cheaper) live stream at home.
Plan future goals
Life has by no means returned to normal. But for many Americans, the prospect of a vaccine is only weeks or months away. Use the time until then to prepare for what is to come.
Laughter says it should be thought of as an advance notice. “The vaccines aren’t coming out as fast as we’d like,” she says. “So start your clock.” When all is said and done, set aside a certain amount each month to meet a goal.
For example, if you want to travel again by a certain date, use the next few months to transfer money to a specific savings account. If your student loan payment is on hold, plan how you will strategically spend those additional funds in the meantime. And be prepared for that extra bill when it’s reintroduced.
Regardless of what financial decisions you make, remember whether or not we are in a pandemic, the fundamentals of finance are not going away. Spread your money over things you need, things you want, and savings.
Your mappings can change, but “the name of the game is the same as before – budgeting, budgeting, budgeting,” says Ponnapalli.
To better days and better budgets.
This article was written by NerdWallet and originally published by The Associated Press.