The pandemic has changed the way we live and even introduced a new normal in personal finance. Yes, it is a health crisis putting an unbelievable amount of stress in our healthcare industry. A lot of hospitals and other healthcare facilities were running at full capacity with COVID-19 patients. Medical frontliners were pulling in long shifts just to keep up with the demand.
As much as it is a health issue, the pandemic also had a negative effect on our economy. As people got sick, businesses were forced to adapt. For those who cannot, they needed to close down their doors. This resulted in workers being furloughed for weeks, some up to now. Others were let go to help save the business from going under.
With the health crisis affecting businesses, people were forced into an unfamiliar situation. This resulted in a new normal in personal finance out of sheer necessity. Americans needed to adapt and make financial changes in order to sustain a way of life. Oftentimes, this included a lot of sacrifices just to make ends meet.
Americans are starting to adjust to the new normal especially now that some believe the virus is getting under control. CNN shares that COVID-19 cases in 24 states are generally down but people should not be too complacent. Some states are holding the numbers steady and some are still going up. That being said, the situation has forced a lot of people to reconsider how they manage their personal finances.
Spending less than before
A new normal in personal finance starts with people choosing to spend less than they use to. For one, this was a normal routine for the past few weeks. Being forced to stay at home gave you a lot of time to think about your purchases more thoroughly. This was also because of the fact that your income could have been affected by the crisis.
You could be working from home, on reduced hours, furloughed, or even out of a job. Job security is stressful for a lot of Americans at the moment. As a result, most people are trying to limit the amount they are spending to even bare minimum. This is an initial reaction as they try and save as much as they can to prepare for unforeseen expenses.
This is similar to taking on a frugal approach where you try and spend way less than what you budgeted for. It is a good time to take your creativity up a notch to make sure that you still get what you need at a lower cost. It can be preparing and cooking your own meals rather than ordering take out food. You can even start trying to DIY some of the small repairs at home.
New normal in personal financer includes a huge focus on savings
The pandemic taught people not only how to lower down expenses. Saving that money is also a big concept now for a lot of people going through the pandemic. Yes, there are still those that use their money for unnecessary expenses but most people are trying to be better. They want to improve the way they manage their finances.
As the pandemic gave a lot of people a harsh reality check and how vulnerable their income is, saving what they have seems to take precedence over mindless spending. For one, a lot of people are trying to save for their emergency fund. The crisis has only highlighted the need to have some reserve money you can use in times of emergencies.
There also some people who want to focus on their retirement money. This is true especially for those who dipped into their 401k during the crisis. According to CNN, the CARES Act temporarily suspended the early withdrawal penalties on 401k accounts to help people get access to funds during the pandemic.
One of the new normal in personal finance coming from the health crisis is being more in tune with your investment decisions. In the past, you might have been very passive with your investments. You might even rely solely on what your investment manager is telling you. This is a good strategy especially if you are just starting out. But it is also a good idea to understand your investments better.
Take a look at how your portfolio is performing during this health crisis. You can still wok with your investment manager to check if you can make adjustments to improve your situation. There might be opportunities you are missing out on. It is also possible that there are areas you are losing a lot of money on. This needs an immediate change to help you preserve your capital investment.
There is no denying the fact that there are businesses that are poised to thrive under these types of situations. For one, essential industries are still operational. With a few changes to combat the spread of the virus, they are still up and running. It might be a good idea to consider investments in these types of companies when you are going over your investments.
Fear of business start-up
One of the new normal in personal finance that people might be experiencing is the fear of starting up a business. A lot of people are tiring to get ahead financially. This means putting up a business of their own seems the way to go. It is also a dream for most and a way to realize their dreams. But the recent economic developments might have dampened this dream for a lot of people.
The difficulty of companies to stay afloat might be enough to make you doubt your chances of success. But this is one of those times where it could pay off to pursue your dreams of putting up your own business. You need to make sure that you learn from the best practices of other business ventures. Keep in mind also the changes that this pandemic has introduced. For one, people are choosing to transact online more than before. This tells you that you need to find a way to incorporate this behavior into your business model.
Choosing to stay in the workforce longer
A new normal in personal finance also has a lot to do with people choosing to work for a longer time. The pandemic has pushed their goals further away. Just like their retirement date. They could already have everything planned out and then the pandemic hits. They are forced to dip into their 401k account to make ends meet.
Not only where they unable to add to their retirement fund, but they also took money out. These two will drastically lower the fund balance you have on your nest egg. As a result, people would take every chance they get to work longer hours or to simply work past the average retirement age. CNBC even shares that the average retirement age of 65 is already changing.
New normal in personal finance will be inevitable as people embrace the changes that this pandemic brings. It ripples out to a lot of other areas outside medical needs. You have to keep your finances in mind as well. Be ready to make changes especially with your goals in life.