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How to budget for after the pandemic

The end of the pandemic will mean big things to your budget (among other things). How to plan.

Our pandemic year was unmatched in many ways – including how we spent our money. In 2020, we all bought some things we never expected to need (like "Zoom shirts" and "custom masks") and many of us found ourselves in typical annual expenses like vacation trips and summer vacations.

Now that more and more people are being vaccinated, things like traveling and eating out come back on the table – not to mention having a reason to wear pants again.

What does this mean for your budget and financial situation? How can you prepare for the expenses that 2021 may entail, while still setting aside enough money to cover your bills, pay off your debts and save for the future?

Brendan Dooley, CFP®, CRPC® and owner of Meaningful Wealth Management LLC in Philadelphia, PA, advises his clients to take advantage of the post-pandemic period by spending extra money on the experiences they may have missed. “I tell clients to go and have fun, within reason. It's been a tough year, and you can not get that time back. I tell them that we will balance the living for today and make careful decisions for tomorrow. "

Other financial experts suggest that we use this period after the pandemic to get back in economic shape – especially if you feel your spending got a little out of control by 2020.

" Right now – before we lose the lessons from the pandemic "It's time to double down and take the steps needed to take control of your finances and set yourself up for a financial stress-free future," said Pamela Yellen, New York Times bestselling author and founder of Bank On Yourself.

What steps does Yellen think, together with the other experts we consulted? Here are four tips to help you learn how to budget for your life after the pandemic – and help you achieve financial success no matter what next year brings.

In this article:

Predict new expenses [19659013] Many of us rebalanced our budgets during quarantine and took the money we may have spent on work lunches and wardrobe upgrades and put them in media subscriptions and fireplaces in the backyard. When we return to a post-pandemic world, it's time to rebalance our monthly budget again – and start planning for the daily expenses we may have forgotten.

"Predict a Cost Change," said Lawrence Gonzalez, government accountant and founder of The Neighborhood Finance Guy. “Going to work from home reduced transportation costs, meals and even childcare. Add at least a 30% increase in the spending buffer to your budget so that you do not spend money you do not have.

If you need help allocating money after COVID, start by asking yourself where your costs may have increased during the pandemic – and see if you can reduce some of these areas by setting a monthly budget. “While there may have been some common expenses you did not spend in the past year including travel and childcare or gas and commuting expenses, you probably took other expenses such as extra entertainment bills and video streaming services or perhaps funded a Peloton for which you now pay a monthly fee. says Andrea Woroch, a nationally recognized expert on consumer finance who provides simple bidding tips for busy moms. "Find out what monthly expenses you incurred under COVID that you can cancel."

Wait Before Making Non-Essential Purchases

If you balance if your budget frees up enough money to cover the costs of a post-pandemic world and improve your financial situation, fine. But most of us will probably want a little more leeway in our budgets – leading us to our next expert budget.

"Set spending rules," says Yellen, "like waiting seven days before we buy an item over a certain dollar amount that is not absolutely necessary." Yellen notes that if you give yourself a waiting period before making non-essential purchases "You may be surprised at how many of these purchases can not be made – and how much money you can save.

Tana Williams, a personal finance blogger who paid over $ 27,000 in debt in 17 months, agrees." By putting yourself on a spending timeout, you will slow down your roll and keep from snowballing further into debt.To take it a step further, you can set aside money for the items on your list in savings while you wait for the week Then you have money to buy what you want, or you can throw it into savings. ”

Increase your travel budget

When you start saving some extra money from your monthly income, either by rebalancing your budget or avoid unnecessary ink open, what are you going to do with the extra money? Some people may want to put their savings towards a long-term financial goal, such as getting out of debt or setting aside a down payment. Other people may want to follow our expert advice and spend at least some of their extra money on travel.

How much extra money should you put into your budget app from your monthly income? Dooley thinks you may want to increase your travel and food budget by as much as 50% when creating a financial plan for your coming year. "Spend time catching up with people," he explains. “If and when you are vaccinated and feel comfortable, plan to have dinner with old friends. Keep your grandchildren at "just for" parties. Book the beach house that you have always wanted to do for a week.

If you feel obligated to spend your savings on restaurant meals and beach houses instead of putting the money in an IRA or investing it in a 529 plan, tell yourself you are making an investment in the people who mean the most to you . "Conditions are important and Zoom is not the same," says Dooley.

Dooley also suggests that this budget increase be limited to a single calendar year – and to return to your usual spending habits by 2022. "This is not a lifestyle change, but a temporary way to regain some of the joy that the pandemic took from us. .

Build your emergency fund

In addition to increasing your travel budget, you may also want to put some extra money into your emergency fund – especially if the pandemic lost your savings.

"A new study from the Pew Research Center shows that 44% of lower incomes say they have dropped their retirement or other savings since the onset of the coronavirus crisis," explains Woroch. She suggests that you pay for the first-come-first-served strategy of building your emergency fund – that is, having a percentage of your paycheck automatically deposited into your savings account or putting money into savings while making your monthly bills. "This way, you are not tempted to spend the money on unnecessary purchases."

How much should you have in your emergency fund? Experts often suggest setting aside three to six months' monthly expenses – but if there is one financial lesson we have learned by 2020, it is that major life disruptions can be much longer than three to six months.

"Realistically, it can take 18 months to two years or more for things to return to normal for many people financially," says Yellen. He suggests that you start by setting aside what you can – and slowly increase your savings over time. Every time you lower a daily cost or take up a new income stream, for example, see if you can add a little extra money to your emergency fund. "Increase your savings by 1% or 2% whenever possible, and you will not feel the pinch."

These four tips – anticipating new living costs, avoiding unnecessary purchases, investing in relationships and saving for emergencies – can serve as the basis for your budget after the pandemic. Remember that the way you spend your money in 2021 can be as unsurpassed as how you spent it in 2020 – so use the advice of our financial experts to create an spending plan that enables both flexibility and stability. This way, you can start preparing not only for a year after the pandemic but also for the financial goals you hope to achieve in 2022 and beyond.

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Haven Life is a customer-centric life insurance agency. it is supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and your general well-being can be refreshingly easy. ). We believe that navigating life insurance decisions, your personal finances and your general health can be refreshingly easy.

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