4 things to remember with the economy reopening

A shift to a more stable economy would be a welcome change, for sure. But it is also a sign to adjust your perspective on future money management. Most of us will shift from a defensive stance of hoarding money for emergencies to a renewed focus on long-term financial goals. No matter what your ideal financial future is, you can take big steps in that direction by following these four personal financial fundamentals with the economy reopening .

1. Spend less than you earn

Do your expenses increase every time your income does? This is called lifestyle inflation, and it undermines your ability to meet your financial goals. Think back to when you entered the workforce. You probably lived very simply in those early years. But then his income increased and his living situation improved, he bought a better car and frequented nicer restaurants.

Improving your quality of life is not inherently bad for your finances. The problem comes when we keep needing more. It's one thing to go from a rented room without a kitchen to a one-bedroom apartment. But it is quite another to go from a big and luxurious house to a bigger and more elegant one. If you don't cap lifestyle inflation, you could end up living paycheck to paycheck for the rest of your life, you can put this into practice with the economy reopening .

On the other hand, capping your spending, even as your income grows, creates a lot of extra money in your budget. And that extra money can give you the freedom to:

-Save for early retirement
-Work fewer hours to get another degree
-Take an unpaid gap year
-Restart your career in another industry that is more meaningful to you.

There is power in spending less than you earn. Think about how you could increase the gap between your income and your expenses. The quickest course of action is to drastically reduce your lifestyle. You could also keep your lifestyle as it is and start depositing all your future raises.

 2. Have an emergency cash fund
A large cash savings balance often seems unnecessary, until something bad happens. And, as we've learned from the coronavirus pandemic, bad things happen…whether you're prepared for them or not.

Financial experts recommend having at least enough cash on hand to cover three to six months of expenses. If you're over 60, you could even aim for 12 months of spending to reduce your short-term reliance on your investment portfolio with the economy reopening .

Put a line item in your budget for emergency fund savings. If you can change it, save 5% of your salary in that cash account. At that rate, it will take you five years to accumulate three months of your income. You can speed up the process by directing all cash earnings to that account too, like grandma's birthday checks, tax refunds, and bonuses from work.

 3. Avoid high interest rate debt
Credit cards can be useful when you're in a bind, but they also make it all too easy to overspend. The general rule of thumb is to only charge things that you can pay for immediately. Put another way, if you have to flip the balance, you can't afford it. Dumping a balance sheet may seem manageable at first, but revolving debt has a snowball shape. You could fall into this dangerous logic: You already have a balance and buying this shiny new thing barely raises your minimum payment, so what's the harm?

Read More: The consequences of the coronavirus on the Italian economy

The damage is the interests that can become an important item in your budget. The average interest rate on a credit card is around 20% and the average credit card balance is $6,354. That equates to a monthly interest of $102, a sum that surely could be better put to use elsewhere with the economy reopening .

Say no to credit card debt, unless it's your only option. And if you have balances, start paying them off one by one. Stay motivated by figuring out how much cash you'll free up when those debts are paid off.

4. Save in the long run
Cash savings give you flexibility today, while your investment accounts give you flexibility tomorrow. For most of us, the big long-term goal is to have enough savings to support a comfortable retirement, all to think about now with the economy reopening