As we emerge from the worst of the pandemic and subsequent lockdowns, people may be eager to resume travel, eat out, and attend entertainment events. In economist-speak, there is a lot of pent-up consumer demand in the economy. However tempting it might be to say “yes” to every invitation that comes your way, it’s important to be intentional about the choices you make so as not to slip backwards in your financial life.

Millions of people have struggled during the pandemic, possibly through a job loss, lower income due to economic disruptions, or because they needed to take time off to care for young children. Many are still struggling to get back on solid financial footing. For people in this situation, here are some actions to take to get back on track financially:

  • Build a realistic post-pandemic budget. In building a forward-looking budget, don’t forget that stimulus payments are unlikely going forward, and certain expenses, like student loan payments and childcare, will likely start again this year.
  • Pay off any high-interest rate debt accumulated during the pandemic. Start with the highest interest rate debt first and work your way down the list of liabilities. As you pay off one, redirect that monthly payment towards the next debt or towards rebuilding your emergency savings.
  • Rebuild emergency savings. Many Americans had no emergency savings going into the pandemic. Having even a small financial buffer can help reduce the financial stress caused by unexpected surprises. Attempt to accumulate 3-6 months’ worth of living expenses in a liquid savings account.
  • Re-start any savings goals that were paused, such as retirement or college savings. Finally, once you’ve rebuilt your financial foundation, start focusing on your future goals and getting back on track to saving toward them again. Given the massive disruption caused by the pandemic, you may need to adjust your expectations for these future goals.

On the other hand, many people either cut back drastically on spending to make sure they could weather the financial storm or saw their jobs and income hold steady, and in some case even increase. As a result of reduced spending, these Super Savers saw their savings rate increase dramatically. In fact, the US savings rate went from under 10% prior to the pandemic to over 33% in April 2020. For people in this fortunate situation, now is an excellent time to set realistic goals for the money saved over the past year. If you’re looking to get back to the activities you love, you’ll also want to plan for an above-average spending year. At the same time, you’ll want to think about allocating funds towards other goals like college savings, buying a vacation house, or retirement. Investing money saved last year might allow you to retire or achieve financial independence a year or two earlier. The key to success is balancing the wants of today with the needs and wants of the future.

The set of choices you currently face depends on your unique post-pandemic finances. The point is to be intentional in how you allocate your resources and to make sure you remain on or regain solid financial footing.  As we look forward, the most significant skill we can develop is flexibility and the ability to be resilient no matter what the future holds. Building a solid financial foundation is key in building resiliency. Planning for contingencies and being intentional with our spending helps build flexibility into our financial plan.