Now that the world is opening up again, your spending habits are probably changing. Gas expenses may have increased by getting out more. You may be feeling the need for a social spending spree of outings, dining, and events that you haven’t been able to indulge in for over a year. You may also be earning more again and feeling more secure financially. Or, you may feel lost about how to recover from the past year. Rather than “winging it,” now is the time to rebuild your post-pandemic financial health with a new budget!
Building A New Budget
The first step to building your new budget is to figure out where you are. Have you avoided looking at your account balances, spending habits, or bills lately? You’re not alone, but it’s still time to dust off your sound financial habits and bring them back to life.
Ask yourself where are you spending the most of your money? Where do you need to spend less? How have your savings habits changed? How can you bring in more income or lower debt?
Next, list your expenses along with your income. Are you able to meet your obligations? Are there smart spending swaps you can make to meet your new post-pandemic needs? For example, if you now need to spend more on gas, can you spend less ordering food deliveries?
Like many, the way you look at spending versus savings may have changed over the past year. Do you have a healthy emergency savings account that could cover at least three months of expenses, or is your emergency fund depleted and needs to be refunded? Make sure your new budget includes your new savings habits you want to achieve. And if you aren’t able to save as much per month as you like (or at all), how can you reduce bills or take on another job (even temporarily) to give your savings a turbo boost?
You want your new budget to fit your new post-pandemic life. You still want to be spending less than you bring in and prioritize saving over impulse spending. Remember that budgets are goals that can be readjusted at any time as your situation changes.
Avoiding The Urge To Overspend
Likely you have a new itch to get out, explore, and live. However, those things always come with a price tag. It's essential to allow yourself the financial freedom to enjoy the open air again and not go overboard on spending. It is an easy trap to say you will splurge for a week because "you've earned" or "you haven't been able to," but that week can quickly turn into a month-long binge, making it hard to recover. It is always easier to spend money than to make it and keep it.
Keep yourself in check by deciding how and to what extent you will allow yourself more entertainment, leisure, and travel expenditures. For example, you may prioritize a vacation or weekly outings with friends. Figure out how much you can afford to put towards these indulgences each month AFTER your bills are paid and savings funded. Then decide if you want to spend that reserve for smaller, more frequent outings or save for a more significant event or trip. By clearly defining how much you can spend on leisure activities, you can stay on track of your spending without feeling deprived. As your bills get paid down and your savings build, you can continually adjust your budget for more fun things – like the new wardrobe you probably need!
Finally, remember that nothing is permanent. You may feel free to spend again, but that does not need to turn into an excuse to rack up consumer debt or ignore savings. With a bit of self-discipline, you can enjoy normality and financial health.
By BALANCE, A First Northern Credit Union partner in financial wellness