The current global pandemic has disrupted our lives and upturned the way we do things. Remote work has been implemented in applicable industries and trades. Most brick-and-mortar shops and service-based businesses are still closed.
States are still finalizing their plans to reopen amid the health crisis in hopes of restarting the economy and giving us some semblance of normalcy. However, even if establishments were to reopen, it still wouldn’t change the impact that the pandemic already had on the way we look at and manage our finances.
Whether you’re still employed at this time or not, it might be a good idea to take this time to evaluate the way you’re managing your finances.
Financial Management and Goal Setting: Adapting to the New Normal
The way people and households have managed money this time was changed by the recent economic and market upheavals. The coronavirus has not just forced us back into our homes, but it also made us reckon with this new normal as far as our employment, lifestyle, and finances are concerned.
People are responding differently to the economic downturn based on their financial and employment status. A recent survey found that:
- 7% have tightened their belts due to the uncertainty
- 21% are more cautious with their spending
- 27% have not changed their spending habits
- 45% may not be spending as much but might change once businesses resume
The same survey found that when it comes to saving and investing:
- 6% stopped putting money into their investments
- 6% started to build savings and emergency fund
- 12% made adjustments to their savings and investments due to market volatility
- 76% did not change anything
One universal rule that almost everyone knows is your budget determines your financial control and future. Should you make certain adjustments to it over time? Yes, of course. Do you abandon it in times of uncertainty? Definitely not.
No matter what your cash flow or employment status looks like, your budget is your best friend. You need to set adapt to the changing times and make sure you align your goals with it. Regardless if you’re presently employed, are looking for work, or are retired, you need to write down your financial goals, determine your budget, and commit to it.
Start by identifying your present and future needs and estimating how much you want to set aside for your savings. Then take a look at how your daily expenditures look like.
You can use this formula:
Average monthly income – average monthly expenses = Average monthly loss or gain
Based on this, you can compare what’s left of your monthly income with your calculated savings or retirement goals. Give careful thought to how much of it you will use for your discretionary spending without compromising your long-term goals.
Below is our recommendation for a typical monthly budget plan:
- 30% for housing expenses
- 15% for transportation
- 10% for debt payments
- 10% for savings and investments
- 5% for health care premiums
- 30% for other living expenses
Housing expenses will eat up most of your budget as it covers your mortgage or rental, basic utilities, insurance payments, and taxes. At this time, you may consult with tax professionals about provisions for a possible property tax reduction given the present circumstances.
Next, debt payments should be one of your top priorities. If you can hold off on some non-essential expenses to settle your debts. Start by focusing on paying off the higher-interest debts and gradually settling the lower-interest loans.
Savings and investments include your planning for your long-term retirement goals. Be wise and discerning where you invest your hard-earned money in, especially at this time that the market is volatile. You need to make calculated and well-informed decisions because this is your future we’re talking about.
Health care premiums are also a must. Never overlook them because you wouldn’t want to be caught off guard by out-of-pocket expenses. Take into consideration all costs and possibilities, as this pandemic has shown us.
Whatever season you’re in, whether you’re retired, employed, or in-between jobs, what matters is you start taking control of your finances and your future.