As the U.S. economy begins to recover and reopen, many consumers are still scrambling to regain their financial footing. While the conventional wisdom is to sock away six to 12 months worth of savings, that became an impossibility for many during the COVID-19 pandemic, as millions of people lost their jobs, small businesses were forced to shutter, and day-to-day living expenses piled up. The stimulus checks helped, but not necessarily enough.

There is some good news on the horizon. As more Americans get vaccinated and infection rates ease, the U.S. economy is slowly reemerging. Businesses are reopening, hiring is on the rise, and that eventually should ease some of the financial strain felt by many.

In March 2021, the personal savings rate—which reflects the ratio of total personal savings minus disposable income—surged to 26.6%. While saving is up, that figure also indicates a short-term slowdown in consumer spending, as people hold onto more of their money. The last time the savings rate was this high was April 2020, when it hit 33%. While it has slowly eased during the past 12 months, it has remained above 12%, compared with pre-pandemic levels that were below 10%.

Nonetheless, an increase in savings doesn’t mean that everyone is sitting on piles of cash. “What someone should do with their personal savings is entirely circumstantial, however, as some industries have been hit harder than others,” says Ryan Detrick, vice president and market strategist with Cornerstone Wealth Management. “If you’ve been one of the lucky ones who hasn’t had a major disruption in life because of the pandemic, now can be a good idea to assess any outstanding debt and either refinance while interest rates are low or consider paying off some of this debt. For those who are barely making ends meet, it’s a complicated subject to provide advice to.”

The COVID-19 Financial Hit

While the longer-term outlook is looking a bit brighter, the near term remains unsettled. Consider this: Half of Americans in a recent survey by Investopedia sister site The Balance said they have less than $250 left over each month after expenses, and some 12% said they have nothing left over. Debt is also weighing people down, with 29% saying their credit card debt had increased during the pandemic. According to a Charles Schwab survey, 53% of Americans have been financially impacted by the pandemic.

A separate survey by T. Rowe Price painted an even bleaker picture, with nearly 70% of respondents saying their financial well-being had been negatively impacted by COVID-19, citing layoffs, reduced work hours/salary cuts, and overall less income as the top three reasons. Prior to the pandemic, 71% said they had a sufficient emergency fund. Now, 42% say they need to replenish their emergency fund, with 44% saying they need to increase the size of it.

“The pandemic has reminded us of the importance of having a budget,” says James Boyd, education coach at TD Ameritrade. “When you know where your money is going, it can make it easier to isolate needs and wants and shift more toward necessities.”

For some, that may be much easier said than done. “The pandemic impacted people very differently,” says Brian O’Leary, wealth advisor and senior analyst at Aline Wealth. “The key lesson is circumstances can change very rapidly.”

Only 33% surveyed by T. Rowe Price (and 30% surveyed by The Balance) said their finances had improved during the pandemic, mostly due to less spending—a luxury that not everyone had.

While there was a lot more saving going on over the past year, “I have a concern that people will feel a sense of relief coming out of the pandemic and overspend to make up for lost time,” says Michael Resnick, senior wealth management advisor at GCG Financial. Nearly a quarter of Americans said they are ready to splurge for that exact reason, according to the Schwab survey, while 47% just want to get back to living and spending like they were pre-pandemic.

“We encourage it, as long as it’s done responsibly,” says O’Leary, adding that giving in to that urge should be done as part of a solid financial plan “that includes a buffer.” A recent survey from McKinsey & Company shows that more than 50% of U.S. consumers plan on splurging this year, with half of those respondents citing pandemic fatigue, while the other half said they’re willing to wait until the pandemic is over before breaking out their wallets.

Spending Makes a Comeback

As more people get vaccinated, the urge to get out and spend will likely continue to increase. “While COVID-19 upended nearly every corner of American life, many are starting to see the light at the end of the tunnel and are ready for a reset,” Jonathan Craig, Charles Schwab senior executive vice president and head of Investor Services, said in a statement. The Schwab survey showed that 64% of Americans called themselves savers in 2020, and 80% said they planned to continue to save more than they spend in 2021. More good news: According to the McKinsey survey, 86% of those who are vaccinated either expect their finances to return to normal by the end of the year (52%) or their finances are already back to normal (34%).

All the same, the National Retail Federation (NRF) expects a pickup in spending. The NRF is predicting that retail spending will top $4.3 trillion in 2021 as more people get vaccinated. That’s up from $4 trillion in 2020 and $3.9 trillion in 2019.

While all of those figures are good news for the economy, that doesn’t mean consumers should spend with abandon. “The basic tenet of financial planning, of thinking long term and spending less than you earn while keeping an emergency fund, has proven to be the saving grace for many of my clients throughout this past year,” says Resnick.

Detrick agrees: “The age-old rule of thumb to aim to have six to 12 months of expenses saved in the event that you lose your job still applies, but perhaps the pandemic caused many to reevaluate the importance of this buffer and the likelihood that they may need to use it at some point.” It seems some are heeding that advice. Nearly one-third of those surveyed by The Balance said they were saving more now than before the pandemic, and one-fifth even managed to invest more.   

Steps for Those Barely Getting By

Those in a more financially precarious position will need to proceed with more caution. “We expect the economy will rebound sharply—and it has so far—but it may not feel that way for everyone,” says Detrick. “While many types of debt received forbearance during the pandemic, it’s likely that these protections will eventually be lifted, so being prepared for any debt obligations will be critical as we begin to see the light at the end of the tunnel of the pandemic.”

Some of it comes down to planning, yet only about one-third of Americans actually have a financial plan in writing. Of those without a plan, 42% say it’s because they don’t have enough money to make it worthwhile. “From a fiscal standpoint, it’s going to require a massive intervention on their part,” says O’Leary.

Among the things to consider are:

• What are the prospects of your income returning? If the answer is “not good,” then you may be forced into thinking about a career change, which comes with its own set of challenges and stressors.
• If you can’t do anything to improve your income, then look at your expenses. Is there any wiggle room to negotiate payment plans or cut anything out?
• If you’ve received COVID-19 mortgage forbearance, rent relief, or student loan relief, then look carefully at the rules about when it ends and what happens next.

“There is a whole spectrum of actions you can take, and you have to be creative,” says O’Leary, adding that while some people may face some very hard choices, “it’s better than being forced into not having any choices later.”

The pandemic has been a scary wake-up call about how lives can be overturned with very little warning. “For many, this will be an experience they don’t want to relive,” says O’Leary.

As the economy regains its footing, having to dig out of debt makes it even more crucial to start thinking about the future and set manageable short- and long-term goals. “What we really need to do is be honest about your debt and desire to address those issues,” O’Leary says. He acknowledges that it may seem like a lofty goal for those who are barely making ends meet, but there is help out there.

Among the things you can do are:

• Talk to your friends and find out what works (or doesn’t work) for them.
• Ask friends to recommend a financial advisor. Many will give a free initial consultation, while some, such as the Foundation for Financial Planning, offer pro bono services.
• Most important: Take it one step at a time.

The ultimate goal is to work toward building an emergency fund. That advice has been true pre- and post-pandemic. How that is achieved will vary depending on your circumstances.

“A lot of people learned some tough lessons,” says O’Leary, but what’s important is to “start somewhere.”