As the economy reopens, many people are also reopening their wallets. More money is being spent at restaurants, gyms, the movies, on new clothes and travel. While it's OK to be in a celebratory mood after several months of lockdown, financial analysts caution that this spending may do more harm than good. According to a recent study by Northwestern Mutual, over 30% of American adults admitted that their financial discipline improved during the pandemic. This lavish "revenge spending" can easily degrade the financial gains made during the pandemic. So, what money habits can you keep to continue saving money and maintain your financial habits now that the economy is open?
Pay Closer Attention to Your Finances for Better Money Habits
The pandemic forced many of us to keep an eye on our finances. 40% of Americans say they paid closer attention to their finances during COVID-19 than ever before. If you want to keep saving more money, this is a good habit to get into or keep as the economy reopens. The best way to start is to track your spending for three months.
Once you do that, determine how much you want to be spending every month. Create a budget to align your spending with your priorities. If that's a bit complicated, adopt the 50/30/20 budget. Here, 50% of your income goes to needs, 30% to wants and 20% set aside for savings. After a while, you will find ways to rework your budget to increase your savings by cutting expenses.
Ditch the Old Stuff
During the lockdown, there are things that perhaps you didn't miss. For example, activities that used to eat into your budget, like after-work happy hours or regularly buying new clothes to keep up with the Joneses. It's normal to admit that these things don't matter. And there is no need to go back. Direct this "found" money towards savings. But don't stop there.
Since we're ditching old stuff, take a moment to figure out what you value the most and prioritize it. If there are any old items you don't need, eliminate them. Pressing this reset button can be liberating emotionally and financially.
Take It Slow
As the economy reopens, you will receive more social invitations. Many of us may not be able to say no after staying home for several months. These invitations present opportunities to spend money. While you may not say no to all of them, it's wise to first take a deep breath for good money habits. Financial experts and psychologists agree that money is an emotional thing. And it can be challenging to deal with some feelings. So give yourself some time before responding to social invites.
Before spending money, look at your values. Consider spending money on experiences with friends and loved ones instead of buying new stuff. And if you must shop, please do so with a list in hand. Keep in mind that you don't need to attend all social invites or a whole new wardrobe to get back to normal life.
It's Not Too Late to Repair the Damage
If you've already "revenge spent", don't beat yourself. Overspending a couple of hundred is different from blowing thousands of dollars. You can do something like making a return. But more importantly, find out why you overspent. Were you upset when shopping? Or did you do it because of your friends or family's influence? Identifying the underlying cause can go a long way to prevent you from lavish spending in the future.
Spend on Bettering Yourself
The pandemic pushed many people to improve their careers. Many spent money on education for additional training. Now that the economy is open, don't stop investing in career advancement. Industry experts say it is the best time to increase that budget.
Try New Money Habitsf
As the economy recovers, job opportunities will increase. You can use the skills acquired to find better-paying positions or negotiate a raise with your employer. Use the increased income to boost your savings.