Spending

Brunch & Budget CEO: How to create a post-pandemic money plan that works for you

"Giving up your avocado toast isn't going to buy you a house."

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Twenty/20

As Covid restrictions loosen across the country, millions of Americans are rediscovering the pleasant little surprises of post-pandemic life: the warm buzz of a ballpark filled with fans, the air-conditioned anticipation of catching a new movie on the big screen, and the reassurance in knowing that your co-workers do, in fact, exist from the shoulders down.

But as life after Covid ramps up, folks might be in for a less pleasant surprise when they take a look at their budgets, says Pam Capalad, a certified financial planner and the founder and CEO of Brunch & Budget in New York City. "If you've been saving money during the pandemic, you might be feeling comfortable about your saving and spending," she says. "But even though you may have gotten rid of some old bad habits, you may have developed some new ones."

So far, those new habits — such as paying more for streaming entertainment or ordering more meals through delivery apps — may not have hurt your bottom line. Americans upped their personal savings rate to record highs during the pandemic, thanks to economic stimulus and the disappearance of major expenses such as commuting costs and student loan payments from many households.

Nearly two-thirds, or 64%, of Americans identified themselves as "savers" in 2020 rather than "spenders," according to the Schwab Modern Wealth Survey. Even more, 80%, say they plan to be "savers" in the year ahead.

But as your Before Times expenses come back online, your new newfound spending habits could put a strain on your finances. "All of a sudden, all those small purchases can creep up on you," Capalad says. "You're better off reevaluating what your spending values are now."

Here's how she says you can make a post-pandemic budget you'll actually stick to when normal life resumes.

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Pare back your spending, but start small

To understand how your spending is going to look post-Covid, you need to assess how your spending habits have changed during Covid, Capalad says. "Go back and look at your last three months' worth of expenses," she says. "Am I ordering out more? Am I taking more Ubers because I'm not riding the subway anymore? The only way to find out is to look."

Use a site that aggregates your accounts, such as Mint or Personal Capital, to track expenses, Capalad recommends. But you needn't get into every nickel and dime for the purposes of this exercise. "Pick your three biggest categories — say, food, shopping, and entertainment — and see where the money is going."

You may find that you're overspending in some of these areas, but it would be unwise to try to cut back on all of your spending in one fell swoop, Capalad says. "That's like going on a crash diet," she says. "It may work for a short period, but then it's, 'Wait, I hate this.'''

Instead, pick one area to pare back on. If you're spending too much shopping online, leave your prospective purchases in the cart and give yourself one day make online purchases per week, Capalad suggests. "Instead of spending $30 here and $40 there, it's, 'Oh, I was going to spend $350 online this week? No way.'"

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Be intentional about where your money is going

OK, you know you need to do some budgetary trimming to make room for expenses coming soon to a bank account near you. But where to cut first?

This is where having a spending hierarchy can come in handy, Capalad says. She recommends breaking down your budget into four categories:

  1. Basics: These are the things you have to spend on, no matter what. Rent, utilities, student loan payments. This number is nonnegotiable.
  2. 'Yes' money: This is the portion of your paycheck that you put directly into savings or investments. "It's so important to establish the habit of saving regularly," Capalad says. "Pay yourself first. Set this money aside and automate it."
  3. Details: "These are the things that replenish you," Capalad says. "They give you willpower and make you feel whole." Here you'll find the expenses that you may feel guilted into cutting out: your daily lattes, boozy weekend brunches, and new pairs of collectible Nikes.
  4. Nothings: The things you don't even remember spending on. "This is, 'I didn't realize I was spending $100 a month on movies,'" Capalad says. "Or, 'I'm spending that much on Ubers? I should buy a bike or start taking the subway again.'"

Capalad says it's often her clients' first instinct to cut from the "details." That's the wrong approach. "These are the things we want to cut because we remember them," she says. "But it's important to identify and own these expenses that fill your emotional needs and make you feel like a person."

By knowing which discretionary expenses actually make you a happier person, she says, you're far more likely to make meaningful and lasting cuts to your expenses. Hint: The "nothings" category is more likely to contain easily cut purchases.

Plus, you can ditch the guilt that life-enriching purchases are somehow keeping you from your financial goals, she adds. "Giving up your avocado toast isn't going to buy you a house."

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