Should you also adjust your habits?
- A new survey reveals that the pandemic has inspired many people to rethink their financial habits.
- It might be helpful to take a closer look at your personal financial situation and see if any changes are needed.
There may come a time when you decide to re-evaluate your financial habits. For many Americans, that time was the pandemic. In fact, 59% of consumers plan to make permanent changes to the way they spend and save in the wake of the COVID-19 crisis, according to a new survey by Lincoln Financial Group. If you’re not sure you should follow their lead, ask yourself these questions.
1. Do I have an emergency fund?
The pandemic has taught us that our financial situation can change in an instant and that we need protection in the form of savings. If you don’t have an emergency fund with at least enough cash to pay for three months of essential expenses, it may be time to change your ways to allow for an increased savings effort. It could mean spending less on nonessential items or making bigger changes, like moving to a more affordable home, to free up some cash.
2. Has my debt increased or decreased?
It’s not uncommon to have debt, whether it’s a credit card balance or a personal loan. And if your debt is going down month over month, you might not need to make a lot (or none) in your spending habits. But if the opposite happens – you keep increasing your debt – then maybe it is time to tighten your budget and cut back on leisure spending until that debt is reduced. Or, you may need to consider getting a second job to raise money to reduce your debt.
3. Do I have any money left at the end of the month?
Generally speaking, it’s a good idea not to spend your entire salary month after month. Even if you don’t have unsanitary debt and have emergency savings, you should ideally set aside money each month for retirement. If you can’t do it, maybe it’s time to rethink some of your spending.
4. Do I have a clear idea of what my different invoices are costing me?
It’s good to have an idea of what you’re spending across various expense categories, from groceries to medical bills to entertainment. If you consider yourself ignorant in this regard, then you really need to be on a budget. That way, you’ll have an easier time tracking your spending and making choices that will help you achieve different financial goals, whether it’s saving more or paying off debt. You can set up a budget on paper, on a spreadsheet, or through one of the best budgeting apps.
For many people, the pandemic has served as a financial reality check. And while many people have learned the hard way that they need to manage money matters better, the bright side is that many have been inspired to make positive changes that improve their financial situation.
It’s worth going through these questions and seeing if a change in your saving and spending habits is in order. This could end up improving your outlook and giving you the much-needed peace of mind.
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