Now that spring is here, it is a good time to conduct a thorough review of your finances and address any neglected areas. Here is how to spring clean your finances after a year of pandemic living.
Update your budget. Your spending patterns might have totally changed over the last year: According to the Federal Reserve Bank of St. Louis, travel, hotel, restaurant and bar spending fell during the pandemic, while grocery and beverage store spending went up.
So it may be time to create a new budget that reflects current expenses, said Curtis Bailey, a certified financial planner in Cincinnati. "COVID changed spending patterns last year, and potentially going forward," he said. He suggests anticipating what habits you plan to continue beyond the pandemic and avoiding any drastic changes, such as buying a second home, until you've done a thorough analysis of your needs going forward.
Set new financial goals. Looking forward to beyond the pandemic, you might want to set new financial goals, such as finally taking a big vacation or finding a job that allows you to continue working from home. Andrew Mitchell, a financial adviser in Grand Rapids, Mich., suggests asking yourself if you are prepared for the next catastrophe. Looking back, do you wish you would have had a larger savings fund going into 2020 or more diversified investments?
Review your insurance coverage. According to the Federal Housing Finance Agency, home prices rose 10.8% between the fourth quarters of 2019 and 2020. You might need more insurance coverage than you now have. Los Angeles financial adviser Noah Damsky also recommends increasing coverage for water damage.
Streamline subscriptions. Because of all the time spent at home, many families increased their spending on subscription services such as Disney-Plus, Netflix and HBO. As we all start to leave the house more, it might be time to scale back.
Update your credit card. If your spending patterns have changed, you might also want to consider a new credit card that better maximizes your current lifestyle. Bailey suggests first logging into your credit card accounts and pulling up a summary of last year's spending, as well as the rewards that you earned.
Did you maximize your reward-earning potential and redeem those rewards in valuable ways? If you spend a lot on takeout or restaurants but your existing credit cards don't reward you for that spending, then it might be time to apply for a new card that does, he says.
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