The quarantine caused by the coronavirus has set up a murky economic future, to say the least. Regardless of your particular situation, the current crisis requires everyone to budget their finances and prepare for the turbulent financial period of time ahead.
If you’re wondering how you can trim up your budget (or if you don’t even have a budget in the first place), here are some monetary considerations to keep in mind as we all move forward.
Set Up or Update Your Budget
Having a budget is essential to financial health. It’s the first step that must be taken if you want to survive an economic downturn with your finances intact.
You may already have a budget in place or you might still be holding out on putting in the leg work — either way, now is a good time to go over your budget situation. Even if you’re in college, it’s important that you identify your academic income and expenses. Chances are you’ve had to deal with a shift in housing — especially if you lived on campus — and have had to set up a remote learning space.
Regardless of the scenario, if you’re new to budgeting, here is a quickfire list of steps that you should take in order to set up a new budget.
- Choose a budgeting medium: This can be a spreadsheet, a budgeting app, or even a simple pen and paper.
- Select a budgeting method: This includes Zero Based Budgeting, a Balanced Money Strategy, or the Cash Only Method — find an option that works for you.
- Identify your income: List off any income you have, including your primary income, tax returns, child support, and any side gigs.
- Calculate your expenses: Don’t be shy. Add up each and every way that you spend your money on a weekly or monthly basis. Remember things like regular payments, food, and discretionary spending.
- Create an emergency fund: Try to start setting money aside on a regular basis. While it can be in small quantities, ideally you should aim to eventually save up three to six months of income in this fund.
Getting your basic income and expenses sorted out and starting a rainy day fund is a good start to establishing healthy finances.
If you already have a budget, pull up your document, open up the app, or get out that notebook and take some time to review each and every item. Make any updates or changes that are necessary and generally ensure that everything is in order.
Try to Pay Down Debt
Once you have a budget in place, it’s time to address the “economic downturn” part of the question. What should you be doing to specifically prepare for the likely fiscal challenges that lie ahead?
You can start by paying down debt now. While you obviously need to cover your basic expenses, if you any extra money when you’re done with your budget or if you have a financial windfall — say you get a stimulus check and you don’t currently need the money — seriously consider putting it towards your debt.
Lethargically addressing debt, such as paying your credit card debts too slowly, is a chronic factor of unhealthy finances. If you have the extra income, putting it towards debt can save you money that would have been spent on interest while simultaneously getting rid of the debt that much quicker.
Identify Wants Versus Needs
Wants and needs are two separate things. As you go over your budget, identify what you absolutely need — think food staples, shelter, clothing — and what you want — think Netflix, a new phone, eating out.
You can take this to a pretty deep level. For instance, while pet insurance may be a good idea when things are flush, if money gets tight, it may be time to drop your policy — especially since you can write off various qualifying pet-related expenses on your taxes.
Look for Deals and Relief
While it’s bred financial uncertainly on one hand, the situation created by the COVID-19 pandemic has led to a plethora of different financial opportunities on the other. For instance, if you’re struggling with making your car payment, there are a variety of different coronavirus car payment relief programs that have been set up to help.
On the flip side, if you were getting ready to buy a car soon, there’s never been a better time, price-wise. Car values have already dipped 10% and aren’t likely to go back up too quickly. It may be a good time to get a decent car at a good price.
The point is, making strategic purchases and leaning on specific relief funds can go a long way in easing your budgetary needs for the foreseeable future.
Look for Alternative Sources of Income
Finally, if you’re feeling tight on cash or even if you simply want to beef up that emergency fund, there are plenty of ways to look for alternative sources of income.
There is a slew of different side hustles you can add into the mix, such as freelance writing, consulting, graphic design, and programming. Look for a job that fits your talents and use it to generate a little extra cash on the side.
Surviving and Thriving in an Economic Downturn
From setting up a fool-proof budget to paying down debt, finding relief funds, identifying wants versus needs, and setting up alternative sources of income, there are plenty of ways to survive and thrive in an economic downturn.
The essential factor here is that you actually put in the effort to make things happen. You won’t save your finances by sitting around waiting for a bailout. Instead, size up your financial situation, consider what needs to be done, and then do it.