How to Form Good Money Habits in the New Normal
By: Sophia Young
Thereâs a lot about the pandemic period that you want to forget. For much of it, youâre either isolated, broke, or sick, which can be detrimental to your physical, mental, and financial health. As everyone is coming out and heading towards the new normal, good money habits are something everyone needs to keep.Â
With so much uncertainty coming into the future, a better focus on money matters can help shift you into better habits. There are so many financial improvements we can do in our lives now that weâre going back outside. Hereâs how you can form good money habits in the new normal and be more ready for the future.Â
Start Your Financial PlanningÂ
One good money mindset to have in the new normal is to âstep back, then step forward.â In simpler words, you need to plan first before moving forward with any big spending. If you intend on going for a vacation or buying something big in the coming months, itâs time to reevaluate your future plans.Â
Think about the bigger picture when it comes to your financial health. Sure, you can start cutting down on your coffee and save pennies on the dollar. Instead, you can take a step back and give your life a good, long think. How do you visualize where you are in a few years?Â
Ask yourself a few crucial questions:Â
How much savings do you have?
How much should you save every month?
Do you want to work from home or from an office?
What kind of investments are you comfortable having?
What kind of insurance do you have?Â
Change your answers to these questions according to your long-term needs. Planning is an ever-changing exercise that needs consistent attention. You need to make sure that your plans are not âdreams.â You want them to be actionable, with a specific timeline to help you achieve them.Â
Enjoy, But Donât Go Crazy With Your MoneyÂ
Post-pandemic, people have pent-up energies. Everyone wants to go places, enjoy a vacation, and go out to town. Thereâs a big desire to go out into the world, do the things theyâve always done, and go wild if they can. Itâs not bad to enjoy your hard-earned money but remember to go back slowly.Â
Donât go crazy with your money. Make sure that you have enough money to live through the month. Have a plan in place to pay for entertainment expenses so you can play around guilt-free. Even then, donât go into debt just because you want to feel alive.Â
Look for deals available out there, especially now that businesses are looking to get people walking through their establishments. Living your life means living beyond the moment. Saving some money now takes a good amount of discipline to do.Â
Stick To A BudgetÂ
One of the financial areas that everyone had to learn over the pandemic was budgeting. Sticking to a budget was a must because having cash on hand can be useful when emergencies happen. Being prudent with your disposable cash means you can take stock of your needs and potential expenses.Â
Once we move on to a life post-pandemic, budgeting needs to stay. Not only will it help you prevent overspending, it will also give you a sense of control with your life. As everything gets better, you can generate long-term savings and help you get out of debt or, at least, avoid getting more.Â
Practice frugal, rather than discretionary, spending. Once youâre in a pickle, itâs crucial to know which parts of your lifestyle to cut off. Less spending on travel, eating out, and going to concerts means more savings for you. Reevaluate your cash flow and stick to a set budget for every expense you have.Â
Live Within Your MeansÂ
The idea of âliving within your meansâ can be a problematic aphorism but the truth is that you need to stay within how much you can pay for a certain period without going into debt. Many who lost their jobs suddenly had to cut back on credit card spending and learned that they were going beyond their means, which is never good news.Â
Living within your means is not restricting yourself from your own money. Rather, you need to understand that spending for something out of budget means you need to pull it off somewhere. Even if you take out the credit card to pay for it, the payments that go towards your card should increase.Â
There are many ways to monitor your spending and do your best to live within your means. Itâs one thing to create a budget and itâs another to live within your budget. If you want to maximize some areas of your budget, you need to cut in some areas that are far less important for you.Â
Build A Six-Month Emergency FundÂ
The six-month emergency fund feels like a big number to strive for but you will thank yourself for getting it once you need it. The rule of thumb is to have six monthsâ worth of your monthly expenses prepared as your emergency fund. This money should also be easily accessible and not in any type of investment where you canât easily pull it out.Â
Six monthsâ worth of expenses can be the absolute bare minimum time you would need to find a new job. It can be your period of recovery from an accident or illness. If you can afford to, itâs best to create emergency funds for up to a year. It can be challenging to meet this astronomical number, especially for cash-strapped individuals, but it should be worth it.Â
Start with a small amount. As youâre still healthy, build towards the number by chipping away at it. If any financial issue comes up, this should be money that you can fall back on. A 6-month fund should give you ample financial security to find your way back, while a 12-month emergency fund can give you better freedom of choice.Â
The Bottom LineÂ
Forming good money habits in the new normal can be one of the biggest financial challenges you face. Apart from having to prepare for the worse, itâs a lot of the boring stuff that most people overlook like budgeting and staying within your means. Then again, these will benefit you and your loved ones over time.Â
Follow the money tips above and see why you need to reevaluate your spending habits. As you make personal and financial adjustments, you will slowly achieve the life you want.Â