Before you start spending after the pandemic, make these cash moves
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After a year of lockdown, you might be ready to go out and start spending.
Not so fast.
“We quickly went through what can be described as a major discretionary expense,” said Jim Wang, founder of the personal finance blog. Wallet hacks. “After a year of relatively low spending, you might want to make up for lost time.”
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Jamila Souffrant, creator of the financial education podcast Travel to launch, think some consumers will have this “YOLO-ATP” feeling: you only live once, after the pandemic.
“For some people I think it’s going to be like, ‘Look, I want to spend the money in a way that I enjoy now because tomorrow is not promised,'” she said recently. on his podcast.
Others plan to stay the course. At this point, 32% of American adults said their financial discipline has improved during the pandemic, and 95% expect these new habits to continue, according to a new report from North-West Mutual.
Before you take out your wallet, there are some steps you need to take to consolidate your finances and spend smart, according to financial experts.
Over the past 15 months, your perspective may have changed. You might realize that there are things you thought you couldn’t live without that you really don’t need.
“Take a look at your life and what makes it meaningful,” said certified financial planner Zaneilia Harris, president of the Harris & Harris Wealth Management Group, based in the Washington metro area. “Write these things down.
“Analyze your spending to see if there are any items that you can eliminate because your perspective has changed,” she added.
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Not only is budgeting crucial, but you need to make sure you stay on top of it.
Write down the money you have and what you take out. Also think about what you want to start spending on, whether it’s going back to regular parties or traveling, and build that into your budget.
“It is really meant to guide you so that you can have the best of both worlds: you can live your life in the present and still be financially responsible in a way that allows you to achieve your medium and long term goals, Suffering told CNBC.
If you are not using budgeting app, start using one, suggests Wang.
“Many are free and will have enough features to make sure you don’t spend too much,” he said.
While reducing expenses is the first thing that comes to mind when budgeting, Suffering also suggests thinking about earning more income. Tap into your skills, such as tutoring or babysitting, she said.
One of the big lessons from the pandemic has been the importance of emergency savings.
Make sure you have at least six months of spending saved before slacking off your spending habits, Wang advised.
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If you had to reduce your contributions to your Pension saving plan, be sure to put it back to normal, Wang advised.
The same goes for debt repayment. If you’ve reduced the amount you typically paid for your credit cards, go back to your pre-pandemic plan.
Also consider student loans, if you have any. Payments were suspended during the pandemic and are expected to resume on October 1.
Once you’re ready to spend, do it with intention.
“Always think about it when you buy,” said Harris.
If it’s online, leave it in your shopping cart for a day. If it’s in a store or mall, walk away while you continue shopping. If you still want it, consider buying it.
She suggests using the Marie Kondo method, which is to hold on to things that bring you joy.
“Go to your Zen place and spend money on items that give you joy,” Harris said.