The past year has brought so much uncertainty, not just in health but with our finances as well. Should you be changing how you spend? Changing how you save? Adjusting your investment strategy? What about basics such as how you bank? As we all welcome turning the page to the New Year, these tips can help you begin 2021 with peace of mind.
Spending During the Pandemic
You’ve likely witnessed the stockpiling of toilet paper, frozen food and even alcohol during this time. That’s not to say it’s not important to stock up on what you need, especially as the CDC continues to recommend seniors stay home to reduce their risk of COVID-19, but make sure to avoid panic or stress buying. Those kinds of rash decisions can quickly derail your budget.
Instead, think a bit more strategically. A common approach is the 50/30/20 rule where you budget 50% of your income to things that you need (food, housing, utilities, etc.), 30% on things that you want (such as entertainment, restaurant dining, spending for hobbies, etc.) and 20% to savings. You may want to adjust the percentages a bit, particularly if your income has been affected by COVID-19. In times of uncertainty it is also a good idea to revisit your budget more frequently to make sure you’re keeping on track.
Now is the time to consider creating a contingency budget as well. This type of budget helps you prepare for unforeseen expenses and/or loss of income by eliminating unnecessary spending completely and finding ways to reduce necessary spending as well. Some common areas to cut or reduce include:
- Cable and/or streaming services – Consider cutting out one or the other or at least reducing your plan to the basic level.
- Cell phone plan – Contact your carrier to make sure you’re getting the best deal or consider pay-as-you-go plans.
- Memberships or subscriptions – Check to see if there are any automatically renewing ones that you no longer use or cut those you could do without.
- Go off brand – Whether it’s groceries or clothes, you can save quite a bit this way and the products are often very similar.
- Personal Care Extras – Whether it’s manicures and pedicures, facials, massages or even less frequent haircuts and coloring, cutting out the extras can save you big.
- Gift giving – We certainly don’t mean short-changing family and friends on birthdays and holidays but sometimes less can be more; perhaps secret Santa instead of buying everyone a present or going in as a group on big-ticket items.
As a senior, having someone else take care of the lawn and clean the house can easily be a necessity, however you might consider finding a less expensive option and/or have one of your grandkids help.
Although typically the opposite, we consider hobbies essential to well-being right now. However, consider how you might continue to enjoy them for less, such as buying seeds instead of plants for the garden or reusable supplies instead of disposable ones for other hobbies.
Saving Money During COVID-19
While you can also use a contingency budget to increase your savings for added peace of mind, there are plenty of other ways to increase your savings as well.
If you have two cars, but really only need one, consider selling. Also, when was the last time you priced options on car or home insurance? Not to mention that interest rates still remain low so refinancing might be a smart option if you still have a mortgage on your home.
Speaking of your home, consider raising the air conditioner temp a degree or two or lowering the heat to save money (ideally no lower than 70 degrees or higher than 78 degrees). Changing light bulbs to LED can save on costs too.
And when you do spend make sure to take advantage of cash back apps such as Rakuten or Ibotta which can really add to your savings over time.
While stuck at home you might also consider part-time work. Beyond earning extra income, this can also help you to stay active and maintain a sense of purpose. Depending on your skillset, there are a number of online options such as bookkeeping, consulting, tutoring, writing, customer service and more.
Moving Your Bills and Banking Online
If you’re still doing your banking or bill paying in person, this is an ideal time to switch to online. Not only will it help reduce your risk of exposure to COVID-19, it just makes life easier. Whether it’s your utilities, insurance, mortgage, subscription services, credit cards or the bank, you can check balances and make transactions either online or through the organization’s mobile app. Once you can access your accounts online, setting up automatic payments can also take a huge burden off your shoulders. Mainly because it helps you avoid incurring late fees on missed due dates which can be more likely in times of stress, but also some merchants offer small discounts for online, automated payments to save you even more.
When you do get out for necessities, digital wallet apps like Venmo, PayPal and Apple Pay can make transactions contactless so you don’t have to worry about touching cash or card machines.
It’s natural to worry about stock market volatility, but it’s also important to keep your eye on the big picture so you avoid any rash decisions. In general, you should always consider using emergency funds, making smaller contributions or pausing contributions temporarily before withdrawing cash from your retirement accounts to cover expenses. Many lenders and creditors are also allowing delayed payments or adjusted payments right now so don’t hesitate to call them if you need help.
What’s more, if you are a retiree or soon-to-be retiree, chances are much of your investment portfolio is already in bonds and CDs right now which have held their own. And while no one has a crystal ball as to how stocks will do, if history holds true then riding out the down period may protect more of your retirement nest egg than selling. The one certainty, you should ALWAYS talk to your financial advisor before making any investment decisions.