As the economy improves and Americans begin to emerge from their COVID quarantine cocoons, it is very tempting to go on a spending spree. But, before you do that, the experts say you should make these smart money moves first!
“We’ve gone through what can be described as a major discretionary spending fast,” said Jim Wang, founder of the personal finance blog Wallet Hacks. “After a year of spending relatively little, you might want to make up for lost time.”
Americans have already started spending big. Retail sales surged in March, thanks to the $1,400 stimulus checks that went out. Sales then stalled in April. Speaking to CNBC, Jamila Souffrant, creator of the financial education podcast, “Journey To Launch,” thinks some consumers will have this feeling of “YOLO-ATP”: You Only Live Once, After the Pandemic.
“For some people, I think it’s going to be like, ‘Listen, I want to spend money in a way that I enjoy now because tomorrow is not promised.’”
So before you do something you might later regret, Souffrant and others suggest you take a deep breath and do these things before going on a post-pandemic buying binge.
Check Your Budget
Before you go crazy spending, you have to know what you can afford, and that means budgeting. Write down what money you have coming in and what you have going out. Also, think about what you want to start spending on, whether it is returning to regular nights out or traveling, and incorporate it into your budget.
“It is really meant to help guide you so that you can have the best of both worlds: You can live your life in the now and still be financially responsible in a way that allows you to reach your mid-to long-term goals,” Souffrant told CNBC.
While cutting expenses is the first thing that comes to mind when budgeting, Souffrant also suggests thinking about earning more income. Tap into skills that you have, such as tutoring or babysitting, she said.
Check Your Emergency Funds
One of the big lessons of the pandemic was the importance of having emergency savings. This time make sure you have at least six months of expenses saved before you loosen up your spending habits.
Reverse any COVID-related changes
If you had to derail some of your long-term financial plans due to COVID, such as contributing less to retirement funds, reverse the changes to what you were doing before the pandemic before doing any extra spending. The same goes for paying off debt. If you reduced the amount you typically paid toward your credit cards, go back to your pre-pandemic plan.
“Do I Really Want This?”
Before letting loose, it’s a good idea to “check yourself” before you let fly on a new buy. In other words, Once you are ready to spend, do it with intention. Always take a minute to pause and reflect when you buy. If you are buying online, don’t be afraid to leave an item in your shopping cart for a day or two. If it is in a store or mall, walk away while you continue to shop. And if you do still want it, then consider purchasing it.
What are you dying to get out and spend your money on now that the pandemic is easing? Please reply using the comments below!