Unlike previous years when we didn’t expect a global pandemic, we are better prepared this time around for the new normal. This is what smart budgeting should look like in 2021.
It has been one full year since the pandemic broke out globally. We initially thought it would be ephemeral and over after only a few months. Now, in 2021, we need to accept the fact that the new normal – in every aspect of our lives – isn’t going away any time soon.
This puts our finances in a unique position. Smart budgeting in 2021 means adapting to the realities of the new normal.
Finance 101: Have a personal budget
One of the basics of financial literacy is creating your own personal budget. This is the process of creating a plan to spend your money. A budget can span as long as a year but it is much easier to manage if you create it on a monthly basis.
Having a budget ensures that you will always have enough money for the things you need and are important to you. It will also help you avoid debt or help you work your way out if you are currently in such a situation.
There any many ways to create a budget, but one of the simplest to follow is the 50/30/20 method. According to this rule:
- 50% of your monthly income should go towards paying the necessities like housing rent or mortgage premium, groceries, fuel, regular bills like telephone, internet, electricity, etc.
- 30% of your income should be spent on your wants, like entertainment, dining, new clothes, etc.
- 20% of your income should go towards your financial goals like debt repayment or savings
To make it easier to determine how much money you should allocate every month for your savings, needs and wants, use a budgeting app. There are plenty of versions which are available for free!
Things to spend money on
To save more money in the long run, you will first need to spend some. Think of it as investments. Here are a few things to spend money on:
- A good internet plan — A lot of activities are done from home now, including work and school for the kids. This requires good and fast internet access, especially when there are more people in the family and house. Shopping around for the best internet plans is a must!
- Proper environment for work and learning — In order to increase productivity, you will need a proper working/learning environment. This includes computers, desks, chairs, lighting, etc. These equipment and furniture don’t have to be new. You can save money by buying second-hand items.
- Reusable masks — Rather than buying single-use face masks that are thrown-away after every outing, invest in washable masks instead. Not only does it save you money, but it is better for the environment too! This way, we get to save people and the planet simultaneously!
- Going cashless — Other than protecting you better by avoiding unnecessary contact, going cashless (eWallets and credit cards) also saves you a lot of money by offering you plenty discounts, rewards, and cashbacks! Not sure how to pick the one which benefits you the most? As-Sidq can match you with the best Islamic credit card that matches your specific needs!
Things to cut back on
It might seem like making minor cuts to your budget won’t make a significant difference in your finances but they do. First, reducing your spending can help you put more money toward paying off debt.
Subsequently, cutting your budget can also help reach your other financial goals faster. Whether you’re saving for a vacation, funding the down payment on a house, or starting investing for the first time, extra money in your budget makes a huge difference.
Here are a few expenses to cut back on:
- Unnecessary subscriptions — The good thing with having a personal budget is you can identify unnecessary subscriptions. There may be many accounts that you are not even using regularly or actually need. For example, do you really need multiple entertainment services (Astro, Netflix, Disney+, etc.)?
- International travel plans for 2021 — We know this isn’t easy to hear. But even if borders are open in 2021, it still isn’t completely safe to travel abroad. Save your money for another year instead.
- Impulse shopping — For some people, spending more time indoors have caused them to do more impulse shopping online! Try creating a rule for yourself where after you find something you want to buy, you must wait 24 hours to pull the trigger. You can increase this period if spending is a huge problem for you. Once it ends, you might realize that it was just an impulse purchase and you don’t really want it. If you do, you can buy it guilt-free.
New wardrobe and car accessories — You’re not going out much so what’s the need for new clothes or car accessories? Surely you can get another year out of your old clothes until people begin to return to work. If you do need to buy some, you can save money buying second-hand during 2021.