The 2020 economy is not a reality that anyone would have wished for: high unemployment, shuttered businesses and a wavering stock market. In response to all of these uncertainties, however, some Americans have responded with dramatic changes to the way they handle their money, pushing the “reset” button on their spending and saving habits. With this year’s canceled travel plans, fewer meals at restaurants and, in many cases, less commuting, some people were able to boost savings, pay down balances on debts and cut down dramatically on nonessential spending.
If you’ve been fortunate enough to improve your money habits and keep yourself financially steady over the past six months, now is not the time to relapse. After all, unemployment remains alarmingly high and many aspects of the future are still unclear. As businesses and restaurants reopen in some places, and people attempt to return to normal life (albeit a new normal), how can you continue those good saving practices developed this year and stay focused on your long-term goals?
Use Your Emotions to Benefit the Bottom Line
It’s no secret that our emotions affect our money decisions—that’s part of being human. But you can harness them to your benefit. Say you’ve been practicing good financial habits over the past few months. Use the positive feelings about your decisions and behaviors as a motivation to continue your progress.
Maybe over the past few months you’ve created an emergency fund, paid down a credit card balance or contributed more to your retirement fund. Consider how you felt after tackling those challenges, consider how much you have accomplished, and use those accomplishments as a jumping off point to work toward even more financial security.
Stay Focused on Values-Based Spending
When most of the country was social distancing and staying home this spring, we all had a quick lesson in what truly matters: loved ones, access to good food, a safe and comfortable home and—let’s be honest—Netflix. Suddenly, we weren’t spending all that much on new clothes or expensive trips.
That type of most-important-things-first spending is exactly the way your budget should always be built, not just during a pandemic. “So many of my clients have found during COVID-19 the importance of values-based spending,” says Lindsay Bryan-Podvin, a financial therapist in Ann Arbor, MI, and author of The Financial Anxiety Solution.
Values-based spending is, by nature, personal, so there’s no one-size-fits-all formula. It boils down to spending your money where you most want it to go and not frittering it away on things that aren’t as important to you. To help identify your values, start with a few simple questions about the past few months of your spending, Bryan-Podvin suggests: “Ask yourself: Where do I want my money to go? What makes me feel best? What did I cut from my budget that I don’t miss—and what did I cut that I wish I hadn’t?”
Take your health—how can you align spending with your values? Maybe you realized that jogging and inexpensive resistance bands could replace an expensive gym membership, or maybe you found that you value your gym time enough to pay for it. Maybe you value spending even more on the gym, and you are counting the minutes before your first post-pandemic workout with a new personal trainer.
“I thought dining out was a core part of my identity before the pandemic” Bryan-Podvin says. “But I discovered that what I really liked was the quality time with my partner, when we’re not on our phones.” Once you know what the value is, you can decide where the spend should be. “Think about what changes worked and feel good based on your values, and how you can continue to do those things,” she says.
Commit to Your New Money Habits
The hardest part about cultivating new habits may already be behind you. “The big thing that prevents people from stepping into change or cutting back is the idea that it’s going to be hard—and we don't want to do hard things,” Bryan-Podvin says. “But when we were forced into a new way of living, we reevaluated what was hard.”
But realizing that cutting back was much easier than you’d imagined can, counterintuitively, also be deflating, Bryan-Podvin says. “You might feel that you could have been doing this forever. But don’t beat yourself up because you didn’t know,” she says. “Now that you do know, take those things you’ve learned and apply them and really live in alignment with your values and goals.”
Budget cuts don’t necessarily need to be huge to be effective. Rather, it’s the cumulative effect of many small cuts that really changes your bottom line.
Carefully Consider New Expenses—and Avoid Splurges
Nothing crushes a new nest egg like a splurge, so weigh every new purchase and expense—especially these days, when the urge to buy or spend out of panic or emotional exhaustion can be strong. Before buying whatever is in your cart, ask yourself a critical question, Bryan-Podvin advises. “Am I doing this because it lines up with my financial plan and my values, and I need this for my emotional health and well-being? Was it already my financial goal? Or am I freaked out and thinking I’m doomed and I might as well YOLO?” If it doesn’t fit in with your value plan, it’s probably not worth the expense.
Consider, too, that your own timelines for major purchases and goals may have changed. “Many people have used the pandemic to reassess their five-year plans—and being flexible with your five-year goals doesn’t mean you’ve failed,” Bryan-Podvin says. Rather than upgrading your house, for example, you may have realized the importance of downsizing it instead, so you can save the extra money or, alternatively, afford to invest in a vacation cottage. “This is a really good time to practice flexibility with your lifestyle or goals,” Bryan-Podvin says.
Sidestep Common Slip-ups
Becoming overconfident about your money can quickly derail your progress, so continue to stay vigilant. “Don’t let those financial wins prevent you from being proactive,” Bryan-Podvin says. “Continue to have a monthly money date with your partner, check in on your budget frequently and check in on investments.” Don’t let good months lead to bad ones, she says.
If social pressure from friends and family starts building in ways that will affect your budget, you now have the perfect excuse to simply say no to a group trip, a family event or a dinner out. “Just say ‘that doesn’t make me comfortable,’ without over-explaining why, or that it’s about money,” Bryan-Podvin says. “The pandemic has given us the green light to tap into our wiser selves.”
Build Future Rewards
What if your wiser self wants a secure retirement and a big trip with your family as soon as it’s possible? Yes, you can find a way to save for both—and giving yourself fun things to look forward to in the future can keep you focused on saving. “Practicing a new habit is really hard, so continue to build in motivation and rewards,” Bryan-Podvin says. “I love to travel, so I’m continuing to save for a vacation—every month I put money aside. I kept that savings account going, and it’s rewarding for my mental health and keeps me motivated.”
So take yourself out for that fancy coffee, or reward yourself with a long bath or a Saturday sleep-in—whatever it takes to keep yourself motivated. You’ve earned it.
Julie Anne Russell is a Brooklyn-based freelance journalist. She writes about personal finance, small business, travel and more.
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