On the one hand, things are returning to normal.
The job market in the U.S. is slowly creeping back to life, adding 850,000 jobs in June to get to *just* 7.13 million below where we started in February 2020 (aka the before times), and the Congressional Budget Office is now predicting that we’ll recover all of those jobs by the middle of next year. Plus, consumer confidence just hit a 16-month high, a positive sign that Americans are ready and comfortable spending again.
But as normal as all of this looks and feels, times have changed.
We all just lived through a once-in-a-generation global experience that has radically altered economies all over the world in ways that are just becoming clear.
You’ve seen the Help Wanted signs all over town I’m sure and heard the complaints from employers that they can’t find anyone to work at their businesses, but that trend is just one example of the new reality of the post-pandemic world. Employers are having to adapt to this new normal, raising wages, adjusting prices and reevaluating their entire business models. Those that don’t are falling behind.
It’s the same with our personal balance sheets.
From the experts: “It’s critically important to revisit your budget and how you want to go about spending your money. You could easily fall into the trap of overspending especially this summer, and it could eventually develop into bad habits down the road.” — Greg Giardino, CFP with J.M. Franklin & Company
What does that look like in practice? Consider these suggestions to update and overhaul your budget for 2021 and beyond.
Assess your priorities.
We all experienced the last year differently. Some people lost their jobs and were forced to pivot to new careers, while others made it through relatively unscathed and just saw their spending dip as travel, entertainment and even dining out were pulled off the table.
After a year like that, it’s natural to want to get out and experience life again.
But don’t assume your normal is going to be same as it was before, or the same as someone else’s. Take the time to reassess what your spending priorities really are and that they line up with what’s more important to you today. Don’t blow the savings you’ve built up over the last year just because you can.
Update your price expectations.
Like it or not, we’re approaching an inflationary period. Prices for everything from gas, to food, to travel and more are rising and economists are predicting that this trend could continue for a while as the economy builds momentum.
If your budget was built to address 2020 prices, you’ll need to adjust your expectations to reflect the fact that things cost more these days. Your pre-pandemic budget simply might not work anymore.
Rebuild your savings.
Even for those who were lucky enough to remain employed and working through the pandemic, it wasn’t a good year for savers as we all struggled to adjust to that time in order to make ends meet. Maybe you tapped your savings to pay bills or address sudden issues during the pandemic and have been slow to build that back up since then. Now is the time to make that happen to ensure that the next downturn doesn’t turn into a personal financial crisis for you.
