As the pandemic shut down the world around her, Ashli Smith, an Atlanta resident and mom to a newborn, says she set up autopay for her recurring bills to help her stay organized and avoid late payments. While the pandemic caused incredible financial stress and uncertainty, it also led many consumers like Smith to form new financial habits worth keeping, including saving more and spending less. A NerdWallet survey found that most people who formed new financial habits plan to continue them into 2021.
Here are five habits to consider sticking with:
Spend less, save more. For many Americans, spending less amid the pandemic came naturally because of income loss or fewer spending options. NerdWallet's survey found that among those who said they picked up new financial habits during the pandemic that they plan to carry into 2021, 58% said they were cutting back spending on "wants" and 36% said they were cutting back spending on "needs."
Natalie Slagle, founding partner at Fyooz Financial Planning and a CFP based in Rochester, Minn., says, "For those who were furloughed or laid off, the No. 1 priority is replenishing savings." For those who got used to spending less, she says, "we encourage them to sustain that habit so their cash flow can go toward building up their emergency fund at a higher rate than what was possible before the pandemic."
Stick with a budget. In the NerdWallet survey, 39% of those who adopted new habits that they plan to carry into 2021 said that one of those habits was sticking to a budget.
Many people turned to budgeting to help regain a sense of control that the pandemic took from them, he adds. "The financial habits you've been forced to learn and adopt have the power to create huge, positive, lasting change if you stick with them," says Eric Simonson, certified financial planner and owner of Minneapolis firm Abundo Wealth. Continuing to budget makes it easier to generate long-term savings and avoid debt, for example.
Minimize travel expenses. Among survey respondents, 40% said one of the new habits they plan to continue in 2021 was cutting back on travel spending.
"One reason we saw our clients enjoy lower expenses [during the pandemic] is because they didn't go on their planned vacations," Slagle says. "Not only did that cut expenses, but they also have flight vouchers and unused travel miles to spend."
As travel begins to start again, Slagle says she's helping clients plan on using some of those savings and credits on their next trip to avoid overspending.
Earn extra income. Just over a quarter of those surveyed said they picked up a side hustle or extra work to make money. Kevin Mahoney — founder of Illumint, a financial planning firm based in Washington, D.C. — says earning a side income can help provide financial stability during uncertain times, which is why he encourages his clients to consider it.
"Supplemental income mimics an emergency savings fund. People who can consistently generate self-income are better prepared to withstand financial volatility," he says.
Use autopay for bills. As for Smith, who tweets about personal finance from the handle @badgirlfinances, she says she plans to continue using autopay for bills, even when the pandemic is long over. In some cases, autopay comes with a small discount, too. "It helps me stay organized because I know on a certain date, money has to come out to pay the bills," she says.
