Running the numbers: 6 ways to fine-tune your budget

Personal finances took a hit in 2020 amid the COVID-19 pandemic.

Many families contended with a tight labor market as unemployment jumped and a Conference Board poll found that two-thirds of human resources managers expected to limit hiring during the fourth quarter of 2020. And, 63% of respondents said they expected to announce permanent layoffs or furloughs.

Many workers also juggled squeezed paychecks, as more than one-third of U.S. full-time workers endured at least a temporary pay cut, according to a Magnify Money poll.

The realities of 2020 left many scrambling to control costs.

"In general, most clients we talked to in 2020 were spending less, and those whose jobs weren't impacted by COVID-19 were working hard to save more," said Andrew Iven with BOK Financial consumer lending and deposits. "Many clients adopted a cautious mindset."

Aliviar las salidas de los hogares

To help individuals manage a reduced income—or to guard against a smaller paycheck on the horizon—there are a number of options to trim household expenses, including:

1. Explore the streams. We live in a subscription-based world, which means many of us make automatic payments to a handful of streaming services every month. By compiling and reviewing the list of your current subscriptions, you may confirm whether each is still worth keeping. Or, you may rediscover one that’s been ignored but still provides value.
2. Ensure insurance is cost-effective. While most don’t apply a financial fitness lens to their home and auto insurance, it doesn’t hurt to look for opportunities to trim premiums while keeping coverage at similar levels.
3. Apply 2020 lessons. More than likely, your dining out and travel budgets shrank in 2020, primarily limited to carryout orders and short, drivable getaways. As you plot out and monitor your 2021 spending, consider targeting a budget level midway between 2019 and 2020 outlays and sock away the balance.
4. Distance the drudgery. Given the sense of belt-tightening a budget conveys, “few people actually want to save,” Iven said. Since entertainment, travel and socializing are part of your life; however, it’s fair to designate a chunk of cash each month to either pay for short-term fun or fund larger outings down the road.
5. Give yourself credit. As long as you can pay off the bill in full every month, determine which of your credit cards provide the optimal blend of rewards. If you run a balance, stick to paying with cash or a debit card as interest fees tend to negate benefits.
6. Rev up your auto loan. Much like the boost a refinanced mortgage can provide to your household cash flow, historically low rates can also make reworking your auto loan a smart move.

No matter how large the potential savings, Iven said that the key for discovering areas to save involves overcoming the inertia of your day-to-day life.

"It's always hard to save since you have to do something different to make it happen," he said. "Un enfoque es pagarse a sí mismo primero cada mes. Cambia la mentalidad de 'ahorrar es lo último' a 'es un pago regular que es una prioridad'".

Un proceso continuo

Una vez que haya controlado sus gastos y sienta que las finanzas de su hogar están en un terreno estable, es el momento perfecto para mejorar su red de seguridad financiera, dijo Iven.

Many experts recommend that you set aside between three- and six-month’s salary to buffer any job loss or salary cut. Si bien Iven ve la lógica detrás de esta regla general, construir tal colchón financiero puede ser difícil.

"Tener seis meses de salario ahorrados te da una red de seguridad si de repente te quedas sin trabajo", dijo. "Pero ese es un gran número para mucha gente, así que recomendaría dividirlo en trozos más pequeños y descubrir cómo se puede llegar allí gradualmente.

“And if you can’t get all the way there, something is definitely better than nothing if you suddenly lose your job.”