After nearly a year of upheaval in our investments and our lives—markets crashing, then soaring; travel plans canceled, weddings postponed—we’ve all started to look toward brighter days. But remember, greater freedom to travel and entertain can come with a higher price tag.
Take the time now to consider future expenses to help you make the most of the new normal when it arrives. Here are three strategies to get you started:
- Maintain your moat. As many of us learned last year, cash reserves provide a welcome buffer in times of prolonged uncertainty. Before you leap back into old spending habits, make sure you have cash set aside in your emergency fund—enough to tide you over and pay your expenses for a time if you can’t work. The rule of thumb is to save up six months’ worth of expenses. If someone in your house has a chronic medical condition, or if you are a high-spending household, you might need to set aside significantly more.
- Update your battle plan. While large numbers of people were forced to tighten their belts during the pandemic due to unemployment, others were lucky enough to improve their bottom line. In fact, Americans’ personal savings rate quadrupled last year. If your situation has changed (for better or worse), take the time to revisit your budget to make sure it meets your needs going forward. If you don’t have a budget, create one. Use our budget worksheet to track your monthly expenses and income to get a picture of your savings, spending and overall cash flow going forward. You can budget for upcoming expenses or compare how changes in income will impact your lifestyle.
- Prioritize some pleasure. We know we’re looking forward to seeing friends and relatives—and palm trees—again this year. Now’s a good time to consider the travel expenses you’ll incur in the latter half of 2021. (Lock in your itinerary while there are still bargains to be found on flights and hotels.) If your lockdown routine helped you cut down on debt, make sure you can keep your finances on track while still accommodating your desire to live life to the fullest again.
If you have questions about what your budget should look like post-pandemic, don’t hesitate to contact your wealth management team. We have a variety of tools we can show you to help you track your money better, and we’re happy to lend a hand.