Most of us can agree that our lives are being lived very differently now than before the current global crisis began. Socialization, working, grocery shopping, and holidays look wildly different than they did before the social distancing began to change our worlds forever. These changes have caused many of us to have to think a little bit differently about our financial situations for various reasons.
Many have suddenly found themselves with a significant pay decrease or have even lost income altogether. This can make a stressful situation even more stressful than it already was. All of these factors make the global crisis situation even more of a factor to consider some major changes to your monthly budget in an effort to reduce stress.
This article is going to outline some steps that you can take to make your budget go as far as possible during a major crisis. Each situation is unique and there is no one-size-fits-all solution to your budget situation. However, there are some interesting insights that you can apply to your unique situation to make a serious change in the way you manage your money.
Step 1: Take Stock of Your Situation
Understanding how to best handle your budget is going to require you to take a long hard look at where you stand financially as it is. Before you can plan for the future, you have to take a long hard look at the present.
Evaluate your income as it stands. Are you still working? Have your hours been cut? Are you going to be bringing in less money each month? Is your spouse still working? Has anyone had their hours cut? All of these questions should be your first stop for taking an accurate account of what you are working with financially.
Financial experts agree that having an emergency savings account is key for situations like this one. These same experts estimate, however, that less than half of the American population is equipped with enough money in a savings account to cover even a $1,000 emergency. You should definitely consider how much money you have in savings to help stretch your money during this uncertain time.
If you are used to having income from additional sources, you should also consider that those sources may no longer be an option or may slow down significantly. For example, if you earn money selling a product for a certain company on the side, that income may slow down significantly as people across the world learn to manage their finances a little more tightly than they ever have before.
Once you know where you stand financially, you can begin to work on a plan for moving forward and dealing with this unfamiliar territory.
Step 2: Stop Saving & Overpaying
During a global crisis such as the Covid-19 pandemic we are currently experiencing, it is important to have access to your cash. This means that you should stop all saving efforts until further notice. This is especially true if your money goes into a savings account that cannot be immediately accessed. You may need that cash during the pandemic and you need to be able to access it quickly.
This same concept suggests that you should stop overpaying on your debts to make them smaller at this time. Your best bet is to pay only the minimum on any debts you currently have. Again, hoarding cash is necessary during a crisis such as the one we are experiencing this year.
Step 3: Prioritize the Bills
A global crisis is one of the only times that financial experts will agree it is okay to prioritize the money that goes out of your bank account. In fact, there may actually be programs in place for those who are affected by the crisis. This means that you should focus on paying only the essential bills for your survival before you pay anything else.
Essential bills and expenses are the bills that go toward keeping things turned on that you need in order to survive. This includes your shelter, utilities, and your groceries. Below, you will find a list of the essential bills in the order we think most important:
- Utilities (power, water, phone)
- Healthcare Costs (Doctor Visits/ Medicine Expenses)
- Insurance Premiums
- Other Bills/Debts
If you cannot afford to do all of these, start at the top of the list and go as far as you can. You may also consider calling the people who are responsible for your bills to see if there is assistance available for those who are affected by the crisis.
Step 4: Reduce Extra Spending
While it might be necessary to have certain payments be made, we can probably all stand to take a long look at our budget and make a few cuts here and there. Some of the things that we spend our money on are simply unnecessary expenses that we can easily cut out of the budget and continue to survive just fine.
Entertainment expenses such as Netflix or Hulu are expenses that can easily be cut out of your monthly budget. You may also consider ordering less take out, or reducing your cable package to make your payment each month a little smaller. Cutting your budget can make a huge difference in your ability to survive through this difficult time.
Step 5: Take a Look at Your Debt Options
Most people are putting some chunk of their paycheck toward paying off debts that they have accrued in their adult life. While this might be perfectly acceptable, it can be a frightening burden during the midst of a crisis with no known end in sight. There may be some options that can significantly reduce the amount of money that leaves your paycheck each month to go to paying off your debt.
These options include:
- Debt Relief
- Debt Consolidation
- Debt Settlement
- Debt Negotiation
To determine which option may be best for you, you will need to be sure that you discuss your particular situation with an expert in the field of debt relief. However, these options can be a great tool for easing the burden of living during a time like a global crisis.
Perhaps the scariest part of this whole new situation is the fear of the unknown. We have no idea how long this new lifestyle is going to last in order to combat the spread of the pandemic. Further, we have no indication of how extreme the impact on our economy will be in the end. All we can each do is our part, by budgeting your money, you are doing your part to secure your economic stability.