If the Covid-19 pandemic has changed the way you think about money, you’re not alone! In the event of multiple unexpected job losses, business closures and more, there have been dramatic changes to the way people live.
Changes like—moving towards remote work, more online shopping, food delivery — have become more ingrained in our collective spending habits thereby causing a permanent budget shift.
While 2020 may have caused major shifts in your household’s finances, 2021 is an opportune time to rethink your budget and how it should evolve as the pandemic is slowly reaching its end with an increase in vaccine distribution.
So, here are a few steps we should be taking to prepare our finances for a post-Covid world.
Creating a new budget
With the new normal approaching, you probably need some way of determining where your money will be going each month.
Create a budget with a template, it will help you feel more in control of your finances and let you save money for your goals.
- The first step is to identify your monthly income
- The next step is to create a new budget accounting for all your essential expenses like rent, mortgage payments, insurance, groceries, utilities, transportation, savings, debt payments and child care.
If you’ve found sticking to a budget challenging, then ensure to keep track of your spending.
Overlooked expenses
Formulating a picture-perfect budget is only half the battle, following rules of spending is the other half — and that is challenging if you underestimate expenses or forget the few pieces of the puzzle that incorporate your spending plan. So, if you want to keep your spending in check, don’t overlook the below expenses.
- Food inflation: This has consistently risen throughout the pandemic and grocery bills are still anticipated to remain elevated.
- Student loans: Many households deferred on their federal student loans due to Covid. Ensure to place that expense back into your budget and make your monthly payments to reduce principal with no interest accumulation.
- Retirement savings: If you have adjusted your retirement savings to free up monthly cash flow, or have eliminated saving toward your retirement, this is a vital expense to include in your post-Covid budget.
New savings opportunities
This global pandemic was a wake-up call to start saving for the uncertain days ahead.
- Start with emergency savings. Make it a priority for household budgets post-Covid. If it seems difficult then ensure to take advantage of savings programs that your bank may offer.
- If you’re enjoying remote work and it saves you money on commuting try to lock those savings in.
- Start contributing to a 401(k) or other retirement plans.
Managing debt
A final step to budgeting includes assessing your debt load and formulating a plan to tackle it. Interest rates have hit a historic low and they are expected to remain as is for some time.
Try paying your high-interest credit card debts first.
Refinance your mortgage or loans in the current low-interest-rate environment to attain a lower monthly payment. This could create an income that can be allocated toward emergency savings or paying down debt.
2021 brings with it a mix of vaccine-based hopes amid another surge in Covid cases. But the good news is there is an equal opportunity to rethink your personal finances which could eventually lead to newfound economic stability.
