How to Form Good Money Habits in the New Normal

October 10, 2021
Sophia Young

Exploring Financial Strategies and Economic Insights

This blog focuses on the importance of forming sound money habits in the context of the 'new normal' brought on by the COVID-19 pandemic. It discusses how the economic landscape has changed, with many facing financial instability due to job losses and the need to adapt to a more digitally-centric world. The blog provides practical tips for budgeting, saving, and investing wisely in uncertain times. It emphasizes the need to prioritize emergency funds, reduce unnecessary expenses, and leverage technology to manage finances more efficiently. Additionally, the blog suggests that individuals seek professional financial advice to tailor personal finance strategies to their specific circumstances. It also highlights the role of financial education in empowering individuals to make informed decisions about their money, suggesting resources and tools that can help improve financial literacy.

There’s a lot about the pandemic period that you want to forget. For much of it, you’re 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.

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 we’re going back outside. Here’s how you can form good money habits in the new normal and be more ready for the future.

Start Your Financial Planning

One good money mindset to have in the new normal is to “step back, then step forward.” 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, it’s time to reevaluate your future plans.

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?

Ask yourself a few crucial questions:

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?

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 “dreams.” You want them to be actionable, with a specific timeline to help you achieve them.

Enjoy, But Don’t Go Crazy With Your Money

Post-pandemic, people have pent-up energies. Everyone wants to go places, enjoy a vacation, and go out to town. There’s a big desire to go out into the world, do the things they’ve always done, and go wild if they can. It’s not bad to enjoy your hard-earned money but remember to go back slowly.

Don’t 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, don’t go into debt just because you want to feel alive.

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.

Stick To A Budget

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.

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.

Practice frugal, rather than discretionary, spending. Once you’re in a pickle, it’s 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.

Live Within Your Means

The idea of “living within your means” 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.

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.

There are many ways to monitor your spending and do your best to live within your means. It’s one thing to create a budget and it’s 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.

Build A Six-Month Emergency Fund

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 months’ 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 can’t easily pull it out.

Six months’ 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, it’s 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.

Start with a small amount. As you’re 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.

The Bottom Line

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, it’s 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.

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.

Disclaimer: This article discusses certain companies and their products or services as potential solutions. These mentions are for illustrative purposes only and should not be interpreted as endorsements or investment recommendations. All investment strategies carry inherent risks, and it is imperative that readers conduct their own independent research and seek advice from qualified investment professionals tailored to their specific financial circumstances before making any investment decisions.

The content provided here does not constitute personalized investment advice. Decisions to invest or engage with any securities or financial products mentioned in this article should only be made after consulting with a qualified financial advisor, considering your investment objectives and risk tolerance. The author assumes no responsibility for any financial losses or other consequences resulting directly or indirectly from the use of the content of this article.

As with any financial decision, thorough investigation and caution are advised before making investment decisions.