The pandemic seems to be receding. Now what? How did 2020 affect your finances and how will you adjust? According to a CNBC Make It article, almost a third of Americans reported they got better at managing their money. Over 80% of respondents said they either created a financial plan or revisited and adjusted their existing plan.
New behaviors adopted by respondents most often included reducing their costs of living and spending. Easy to see why spending went down when everything was closed. Going out to dinner or movies and traveling were curtailed significantly, leaving money in our wallets.
Still, work-from-home mandates played a part in internet service upgrades, home office upgrades, and utility bill increases. Arizona air conditioning bills shot through the roof, and we are now seeing an air conditioner shortage as failed units continue to be replaced.
However, those costs aside, people also began prioritizing paying down debt and investing more. The key to all of us moving forward will be to take what we have learned and continue along this positive path.
So here are some tips for rebooting your budget right now:
- Compare pre-COVID spending with current spending. Anything you have learned to live without? No need to go back. Say you started making coffee at home since you weren’t leaving the house. Maybe you can continue to forego the Starbucks. The average daily Starbucks drinker spends about $1,200 a year on coffee. And that’s only ordering a tall!
- Did you increase TV and Internet service levels to compensate for working from home? Remember to adjust those packages back to the lower levels if you are going back into the office.
- Make sure you pay yourself first with the new budget before going right back into spend mode. This can be done via increased 401k contributions (ideally you will contribute at least 15% with the goal of maxing out annually), Roth IRA contributions (even if you think you are above the income limit, we have a loophole for you), 529 College Fund additions, and general investing.
- Cash is not always king, especially in these inflationary times. Do not leave cash sitting in the bank at 0.02%.
We’re entering a new normal these days and you can benefit from taking deliberate steps to secure your financial future. Be sure to work with your BW advisor on reviewing and adjusting your financial plan and goals. If you haven’t created a plan yet, we’d love to build your bespoke financial plan to get you on the path to realizing your greatest Return on Life.