The COVID-19 pandemic has shaken up many aspects of our lives, including our finances. People who had stable sources of income just a couple of months ago are now wondering how they're going to pay their bills, even with help from unemployment and a government stimulus check.
This has forced people to adapt by adjusting their spending and paying more attention to where their dollars are going. But these habits aren't just useful in bad times. Here are three budgeting changes you may have made recently that I recommend continuing even after the pandemic ends.
1. Spending Less on Non-Essentials
The pandemic has forced us to slash our spending on non-essentials because so many of our normal entertainment activities, like dining out or going to the movies, are not options right now. Individuals who have lost their jobs due to COVID-19 have had to take a hard look at their monthly expenditures and make choices about what is essential and what isn't. For example, a streaming service that seemed like an essential entertainment source during pre-pandemic times might not seem as important now.
When life goes back to normal, you may wish to resume your normal spending, but consider carrying on with some or all of your coronavirus budget instead. When you go back to work, you will likely have more money coming in, and you can put that money right into savings to help you achieve your long-term goals, like buying a new car or making a down payment on a home.
2. Prioritizing Your Emergency Fund
Emergencies strike without warning, as we're all keenly aware right now. Hopefully we don't experience another pandemic, but there are plenty of other ways we could end up in dire financial straits. A natural disaster, a car accident, or your child getting seriously sick or hurt could all lead to costly bills you weren't prepared for, and if you lose your job, you might struggle to keep up with your regular bills until you find a new one.
An emergency fund is your safety net during these challenging times. The COVID-19 pandemic left many people scrambling to try to put one together out of their tax refunds and whatever they could scrape together. But if you don't want to be under the same level of stress for future emergencies, you should prioritize building an emergency fund as soon as you can and maintain that emergency fund going forward.
You may not be able to start building an emergency fund right away if you aren't working. In that case, start as soon as you are able to. Aim to set aside at least three months of living expenses, or six months if you want to be extra safe. If you have a high-deductible health insurance plan, make sure your emergency fund contains enough money to cover your deductible unless you're saving for this in a health savings account (HSA).
3. Tracking Where Your Money Is Going
You're not alone in checking your bank account a little more frequently than normal. But tracking where your money is going isn't just something you should do when times are tough. It can give you valuable insights into your spending habits, so you can identify areas where you might be able to cut back and save money.
There are several ways you can track your spending -- pen and paper, a spreadsheet or an app, to name a few. Pick the method that's most convenient for you and stick with it, even once your life returns to normal. It should be detailed enough to provide useful insights into your spending without being so granular that you won't want to keep up with it. For example, it makes sense to track how much you spend on groceries, but you probably don't need to track how much you spend on each item individually.
It's totally up to you whether you follow any of the budgeting changes listed here. No one is going to force you. But they could make a difference in your financial stability and how quickly you achieve your financial goals, so consider giving them a shot.