In Your Debt: Back to pre-pandemic spending? Don’t overdo it

With COVID-19 restrictions mostly lifted in the U.S. (though that’s changing), you may be enjoying a more social summer than you were last year. But dinners out and movie tickets can seem pricey compared with a year and a half of home-cooked meals and whatever’s on TV — especially if you experienced pandemic-related financial hardships.

It could be time to recalibrate your money habits for the way life is now. Doing so just takes some planning and a healthy dose of honest communication.

RECONSIDER YOUR VALUES

Your values may have changed over the past year. Ask yourself a few questions: What did I start or stop spending money on? What do or don’t I miss doing? What specific money goals do I have now? Your answers can help you create a list of your current values, in order of importance, which can lead to an updated spending plan. If you have a spouse or partner, involve them in this process, too.

“Many people think this process is for those who can’t save,” Julie Quick , a financial planner in White Lake, Michigan, said in an email. “I would argue it’s for people who want to live intentionally.”

MATCH SPENDING AND SAVING WITH UPDATED NEEDS AND WANTS

After reconsidering your financial priorities, you can begin to give your money specific jobs. You’ll likely have a combination of short- and long-term goals, like budgeting for weekly outings while replenishing your emergency fund or saving for an upcoming major purchase.

It’s in the name: A spending plan requires planning. Though it’s tempting to meet up with friends and see where the night takes you, for instance, picking where you’ll go in advance allows you to design social outings around your budget.

Be thoughtful about diving back into travel, too. According to U.S. Bureau of Labor Statistics data compiled by the Federal Reserve Bank of St. Louis, airfares have been increasing in the U.S. since March 2021, though they haven’t yet returned to levels seen in February 2020 and earlier.

“Spontaneous travel is exciting, but it can also run away with your wallet,” Vadim Verdyan, head of advice at the financial wellness mobile app Albert, said in an email. “Keep in mind that people usually get the best deals when they plan far in advance and the worst deals when they plan last minute.”

OPEN UP ABOUT MONEY WITH FRIENDS AND FAMILY

The outside pressure to spend is nothing new, though now you may be feeling an extra-strong urge to make up for lost time with people you haven’t seen in more than a year. But all those far-flung weddings and in-person visits may be beyond what you can afford. This is where honest communication comes in, even though discussing money can be difficult. In these situations, it can help to let the other person know what’s going on in your life.

“To tell a friend that something they want to do isn’t in your budget, it feels like a rejection of them,” says Joshua Escalante Troesh, a financial planner in Rancho Cucamonga, California. He recommends telling your loved one about the thing you’re saving up for that makes it difficult to afford the activity. “Most people who care about you will say, ‘Yeah, I understand that.’”

IF YOU OVERSPEND, GET BACK ON TRACK

There’s nothing quite like an enormous credit card bill to ruin the fun you’ve been having, especially if you can’t pay it in full and end up in debt. If this happens to you, it’s time to regroup and reallocate some funds.

If you were saving for something, like a vacation, by automatically transferring money to a savings account, you’ve already learned to live without that cash each month. This situation presents an opportunity: Apply that monthly sum toward your debt instead. You may have to postpone or scale back your trip, but you’ll get out of debt quicker without having to make too many changes to your day-to-day life.

Escalante Troesh recommends putting away your credit cards and using only cash or a debit card for purchases while you pay down your debt. “We’ve dug ourselves in a bit of a hole — not a big deal, people make mistakes,” he says. “But let’s get the shovel out of our hands.”

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This column was provided to The Associated Press by the personal finance website NerdWallet. Sara Rathner is a writer at NerdWallet. Email: srathner@nerdwallet.com. Twitter: @SaraKRathner.

RELATED LINKS:

Federal Reserve Bank of St. Louis: Consumer Price Index for all urban consumers: Airline fares in U.S. city average https://fred.stlouisfed.org/series/CUSR0000SETG01

NerdWallet: Why you shouldn’t book last-minute travel deals https://bit.ly/nerdwallet-last-minute-travel

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