Have fun, but not too much, as economy reopens

Businesses have reopened, so we can return to our favorite restaurants and many countries have begun welcoming U.S. travelers.

That is great news, and we certainly deserve the opportunity to get out and have some fun. But be cautious not to let the excitement of returning to a more normal life lead to overspending. Returning to normalcy will be a transition, and you need to be mindful of your spending.

There is tremendous pent-up demand and desire to get out and enjoy life. During the pandemic, 52% of U.S. households dramatically cut spending. Saving rates increased from an average of just under 10% to 33.7% in April 2020. U.S. consumers are sitting on trillions of dollars because of pandemic-influenced savings and several rounds of stimulus payments.

Revisit your budget to avoid falling into the trap of overspending or careless spending this summer. Develop a plan to ensure you are spending on what is important to you and avoid developing bad habits. This does not mean you should not have some fun, but do it in a purposeful way.

Create a budget that aligns with your goals and values. You also will need to adjust your spending to reflect changes to your income and expenses. Determine how much of your budget will be needed for nondiscretionary expenses. You will need to adjust your pre-pandemic budget because prices of many necessities, including groceries and gas, have increased due to inflation.

A good rule of thumb is to spend about 50% on living expenses, 30% on leisure and 20% on savings. Everyone is different, so you should track and project your spending based on your unique situation. Be sure to include savings as a part of your budget. If your nondiscretionary expenses total substantially more than 50% of your income, look for ways to reduce living expenses.

Once you have budgeted money for living expenses and savings, create a plan on how much you want to spend on travel, leisure and entertainment. Once you have a plan, you are free to enjoy without guilt or fear of overspending.

As COVID restrictions end, review your spending habits, and keep some of the good habits you developed during the pandemic while discontinuing bad ones or spending that is no longer needed.

As our lives return to normal, spending on day care, commuting, eating out, going to the gym, travel, socializing and live entertainment will resume.

You might need to reduce some of the pandemic-influenced expenses such as home entertainment subscriptions, home redecorating, food delivery services and online shopping to pay post-pandemic expenses. Alternatively, keep some of the good, money-saving habits developed during the shutdown. These might include doing your own repairs, preparing more meals at home, virtual workouts, virtual meetings and working remotely a few days a week.