Life is going back to normal. Our budgets probably aren’t ready.
More than a year after the pandemic began, increased vaccination rates are slowly peeling away the restrictions that froze society. California, one of the hardest-hit states during the pandemic, recently lifted its remaining Covid-19 restrictions—marking a symbolic turning point in the battle against the virus.
But reopening means we will no longer be confined to just our homes or neighborhoods anymore. We are back to having endless opportunities to swipe our credit and debit cards—and balancing a budget as we adjust to our revamped way of living is bound to pose some challenges for us all.https://platform.twitter.com/embed/Tweet.html?dnt=true&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X3NrZWxldG9uX2xvYWRpbmdfMTMzOTgiOnsiYnVja2V0IjoiY3RhIiwidmVyc2lvbiI6bnVsbH0sInRmd19zcGFjZV9jYXJkIjp7ImJ1Y2tldCI6Im9mZiIsInZlcnNpb24iOm51bGx9fQ%3D%3D&frame=false&hideCard=false&hideThread=false&id=1406704491483832330&lang=en&origin=https%3A%2F%2Fwww.forbes.com%2Fadvisor%2Fpersonal-finance%2Fhow-to-budget-after-covid%2F&sessionId=afae6fa338971b8d0f8dfb70299d9728f9ed183b&siteScreenName=forbes&theme=light&widgetsVersion=f9f80a909a60b%3A1648751432723&width=500px
Consumers might have saved during the pandemic, but will it last? The personal savings rate, a percentage that illustrates how of our disposable income is put aside for a nest egg or retirement, was consistently higher during the pandemic, hitting 33.7 in April 2020 and 27.7 in March 2021
But experts are now expecting a spending boom.
Consumers didn’t exactly develop good habits during the pandemic. A June survey from the American Institute of CPAs found that online shopping has made us blind spenders and more than half of consumers (52%) buy what they want without thinking because it makes them feel good. Perhaps more concerningly, the survey also found 40% of consumers don’t know their debit or credit balance until they get their monthly statement.
The pandemic taught us many lessons, including that we could all be a little more intentional with our cash. Building a budget with purpose will better prepare us for whatever crisis comes next—and might keep us from overspending now that our routines are semi-normal.
Here’s How You Can Keep Your Finances in Check As You Head Back to Normalcy
Consider these tips to keep your finances in check as you head back to normalcy:
Tip #1: Live a Little
We just survived the traumatic experience of a global pandemic. Many of us faced stressors that we didn’t even know existed, like not being able to share a meal with loved ones or be together for holidays.
That’s why it’s important to live a little first before going full tilt with a budget. You just have to do it strategically.
Jackie Beck, debt reduction expert, recommends people create an entertainment budget with a total dollar amount per month or week that they’d like to spend. The key, though, is letting yourself splurge with a slightly higher amount in your entertainment budget at first.
“It’s your money and your life!” Beck says. “The key is to set limits both time- and dollar-wise for those splurges. Maybe have a celebratory week or two with a set amount where you go out and do all the things you’ve really missed.”
And while indulging in a splurge can be fun, that doesn’t mean this will be your new lifestyle. At some point, the splurge will have to end—and then you’ll have to get back to your regular spending on entertainment activities.
“Just keep top of mind that these are special things, so that you thoroughly enjoy them—and so they don’t become ordinary,” Beck says.
Tip #2: Revisit Your Budget or Make a New One
Reevaluating your budget—or building one from scratch—is one of the most important keys to financial success. It might not be the most thrilling task, but it’s one that will give you a clearer picture of where you stand financially and how much you can truly spend without digging yourself into a hole of debt. A budget sets solid boundaries that empower you to live within your means—and pave the way for a solid financial future.
A solid budget will also give you a realistic idea of how much you can spend on outings. After calculating your fixed expenses, which include things like rent and utility bills, income that’s leftover can then be allocated to “fun” spending. Building that category into a budget will help you determine when you’ve had a little bit too much fun and need to reel in your spending.
“Since we’ve all been cooped up for over a year, it’s easy to convince yourself it’s OK to go out to dinner every night or say yes to every invitation you receive,” says Leslie Tayne, New York-based debt relief lawyer and debt expert. “Be sure to build dinner and drinks into your budget to understand what you can comfortably afford and allot for that many nights out.”
To easily keep up with a budget, Tayne recommends setting up spending alerts on your credit or debit card, or through a third-party budgeting app like Mint.
Tip #3: Drop the Plastic and Go Green
If you find that getting a ping every time you swipe your card is annoying—or you continue to blow past your allocated category amounts each month—reverting to cash-only transactions can be a great way to get back on track.
The envelope budgeting method, in which you stash cash in physical envelopes based on budget categories, is a great way to physically envision the budget buckets you’ve crafted. This way you’ll see in an instant when one category is running low, and when an envelope is empty, you literally cannot overspend–there are no more bills for you to use.
“Spending with cash, as opposed to a credit card, actually has a positive psychological impact,” says Lauren Anastasio, CFP and senior financial planner at SoFi. “Studies have shown that using cash actually reduces the amount of money someone will spend on an expense because of its more tangible nature.”
Those who don’t like carrying cash can opt for alternative methods, such as an app or prepaid card. Goodbudget budgeting app allows users to visualize their budget with digital envelopes, a la the envelope budgeting method; if you’re looking to use a prepaid card instead, be sure to keep an eye out for any monthly maintenance or activation fees.
Tip #4: Get Creative While Staying in
Staying in is probably the last thing any of us want to do right now after months of being confined to our homes.
Realistically, though, seeing friends and family every night at a restaurant or bar is just not a smart way to manage money. You know the saying: Too much of a good thing is, well…not good.
Instead, Tayne recommends getting creative with staying in.
“Ask everyone to bring a dish (it doesn’t have to be homemade — if they want to splurge on Korean BBQ wings, let them!) and/or drink,” Tayne says. “Get creative and use what you have on hand. For instance, if you have whiskey, ask someone to bring sour mix or bitters to create whiskey sours or old fashioneds inexpensively.”
Need help organizing? Try Potluck by Meal Train. The free website allows you to create an event, list what’s needed, and invite attendees. It’ll even send a reminder to your guests 24 hours before the party.
Tip #5: Spend Time, Not Money
Overall, the pandemic has taught us the immense value of being able to spend time with loved ones in person. After separation for so long, even just a brief meetup can satisfy our social needs—and keep us from spending money we might not have.
“If the pandemic has taught us anything, it’s that a walk in the park with a friend or loved one can be something to treasure.” Beck says.
This tip can prove especially important for those who might be struggling to regain their financial footing post-pandemic.
“Our budgets, just like our lifestyles, will likely need to change over time and it often takes some trial and error to appreciate what is realistic and sustainable,” Anastasio says. “Don’t beat yourself up if you can’t stick to your budget perfectly right away and allow for modifications based on how your goals and desires change over time.”