Practice the Pause Pt.4 | Managing your money
The past few months have undoubtedly had a financial impact on each and every one of us. You may have found that your earnings dropped and you had to cut back on your expenditure, or perhaps you were actually able to save extra money during lockdown due to a reduction in eating out, drinking, shopping (unless you are like me and trying to single handily keep the economy afloat via online purchases).
Now as the society begins to open up, we are left scrambling at what to do next? Do we immediately return to normal and resume our pre-lockdown spending habits, or do we re-align our priorities and look at ways we can better manage our money? Because, if nothing else, the past few months have shown us the importance of focusing on the important aspects of life - health and wellbeing of family, friends. Perhaps this has made you re-think the need for spending so much on clothes, cars and other material items. Perhaps the need to self-isolate away from family and friends has reminded you of the importance of spending time and money on family and friends, and making invaluable memories. Either way, moving forward, its important to reflect on your priorities to ensure that you are managing your money in the most efficient and practical way moving forward:
1. Build an emergency fund: If you can save a little money by cutting down expenses on extravagant and luxurious items, you can use the money saved as an emergency fund. The past few months have shown us clearly how much all of our income can be instantly disrupted by a global pandemic. Having an emergency fund can help to provide you with confidence that you are prepared for if the worst was to ever happen again.
2. Stick to new behaviours and habits: After months of not eating out shopping, or travelling, your brain is now used to it. You may have formed some health habits such as learning to cook or cycle instead of take a taxi. Try to stick to these habits as much as possibly, whilst also ensuring not to overcompensate for the lockdown months.
3. Make a list of how much money you can afford to spend in a week/month/year. See where you can cut costs and try to stick to the budget. Try not to overspend. Perhaps you've found the past few months that you don't actually need to spend £80 per month for your gym membership and can instead exercise by running round the park or joining in your local park run.
4. Manage debt: It may be that you have had to borrow money to get by the past few months and that is completely understandable. Or maybe, staying in the past few months has actually given you the chance to pay off any outstanding credit card debt. Before returning to your usual weekend routine of going out every Saturday and Sunday, look at ways you can cut back on unnecessary spending. Continue to make the most of your new found love for staying in and minimise bottomless brunches or all-day sessions at the local pub to once per month and look to pay off any debt you may have accumulated over the past few months. Or if you have been fortunate enough to pay off any credit card debt, try not to fall back into any bad habits, and reduce the chance of building up any unnecessary debt on your credit card again.
So, join DAM as practice the pause and realign our priorities to ensure that we are managing our money as we move into this next stage of our post lockdown lives.
Visit our youtube channel to view our short video from advisor Alex Keddie