How We Budget Has Changed Forever
Budgeting is one of the most important pieces of the personal-finance puzzle. Sticking to a budget helps save money and keep spending under control. But budgeting is also heavily affected by life situations, and for many of us, circumstances have changed drastically due to COVID-19.
Read: Tips To Keep Your Finances in Order Without Sacrificing What You Want
In fact, many things may never be the same. That includes not only things like attitudes about working from home, but indeed, maintaining a budget, too. Thus, we’re going to take a look at how our approach to budgeting has changed forever, and what it may mean for the future.
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Communication Is Key
It’s not uncommon to see personal finance experts advocate for “intentional” spending, even during good times. Intentional spending means not only reducing impulse buys but also stopping to think, “Do I really need this?” These questions have become more prevalent over the past year. But for families, that also means opening the lines of communication more. “In cases like these, it is important to discuss with all stakeholders in an environment where the family feels comfortable expressing their opinions,” says Sam Brownell, CFA, CVA, and founder of Stratus Wealth Advisors. “One of the biggest lessons we have learned from this pandemic is the importance of listening – which is often more important initially than offering advice.”
See:25 Tips for Saving Money With Your Spouse
Looking For More Ways To Save
As we watched the unemployment rate skyrocket due to the pandemic, many people have looked to stretch their dollars further and further. The good news is that there are many ways in which companies are trying to help ease the burden. Food delivery services are one example, says Daniel Kellogg, CFP®, RICP®, senior financial advisor at Personal Capital. “For those who have increased their use of food delivery services, it could make sense to see if your credit card company partners with and offer you credits or discounts on that service.”
The same applies to the increased need for office equipment at home. “Some people may have re-directed budgeted funds for expenses that went away, such as commuting-related expenses,” says Kellogg. “There were also companies that offered employees the opportunity to be reimbursed for purchases they made to properly equip their home office.”
Find Out: The 50/30/20 Rule: Is It the Best Budgeting Method?
Emergency Funds Are Critical
Having an emergency fund is another principle for which personal finance experts advocate no matter the state of the economy. Unfortunately, though, people don’t usually prioritize them when the economy is good. That has changed due to COVID-19. Dan Ariely, chief behavioral economist at Qapital, gave his input. “One main takeaway is that people are now budgeting more for emergency savings. We found that emergency savings have shot up as the #2 topmost savings goal amongst Qapital users in 2021 (up from #8 in 2020). Instead of budgeting or saving for travel or shopping, people are socking away dollars for a crisis.”
More: Cutting Out These 25 Expenses Will Save You $16,142.08 a Year
And Many Are Giving Back
Although times have been tough for so many of us, those who can afford to do so are increasing tipping and charitable donations. Whether that means giving to local charities or tipping those serving takeout orders at local restaurants, people are choosing to give back. “After a year that brought significant financial challenges, particularly for service workers and small business owners, over half (53%) of people surveyed said they plan to give back this year,” says Chris Wong, consumer savings executive at Bank of America. “70% said they plan to support small or local businesses, and 47% said they plan to tip more.”
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