5 Tips to Help You Retool Your Budget and Protect Your Finances During the Coronavirus Pandemic
I still can't believe that tomorrow is December 1st. You would think that with everyone staying home and in for most of 2020, that the year would be going much slower. But, I have found that since being home, we are much more busier than before - with the girls' online classes, my juggling their virtual schooling and our own homeschooling, as well as having my husband work from home. It is crazy how something like Covid can throw everyone for a loop, not just with how we spend our time and being stuck home, but also how it has affected many of our incomes and savings.
My husband had the option of being furloughed or taking a pay cut at the start of Covid back in February. His tech company had all their projects cancelled or put on hold, so they didn't need all these salaried workers. Thankfully, he was a manager, so they kept him on. But, even though he was able to keep his job, he had to take an unexpected pay check. Like most people, we hadn't planned for something like this, and not knowing from week to week if he would lose his job or have more money withheld, we started to look our budget and make adjustments as needed. Yes, we were saving on gas that I would have otherwise spent driving the girls back and forth to classes, and my husband was saving a lot of gas money now that he was working from home, but we were not home more and using the electricity, internet and heat more, which ended up being a wash with the gas savings were otherwise would have saw.
My husband has been a fan of Dave Ramsey's for years, and has read all of his books. So, we sat down and put together a list of needs, wants and savings. Based on what he had read before, and a free calculator we found over at https://pigly.com/budget/, we plugged in numbers and started to see a budget breakdown based on expenses we had each month.
Dave Ramsey and other financial resource sites recommend that you follow the 50/30/20, where 50% of your paycheck goes to needs, 30% goes to wants, and 20% goes to savings.
With the budget calculator we were using over Pigly, I was able to see where each of our monthly expenses for things like savings, housing, utilities, food, debts, medical/health, and recreation were spent. Once all the number were plugged in, we were able to visually see we our expenses fell in each category, and if they were on the low or high side. From there, we were able to really look at what we were spending our money on, and where we could make adjustments. Even though we were home and not going out, we found ourselves watching more television and added another streaming service to the mix. Also, we were trying to support local businesses by ordering take out at least once a week, and found ourselves ordering groceries and supplies online, with some being more expensive than if we had picked them up at the market.
You really don't see where your money goes until you sit down and create a spreadsheet or fill out a budget calculator. But, once you take this step, you can see where a lot of your money is going, and then take a step back and ask yourself is this a need or want, or should we put the money in savings or a rainy day fund? So many people were blindsided when Covid hit, and lost their jobs, got sick and ended up being out of work without pay, or had to leave their job to stay home, as their kids were doing remote school as many schools nationwide decided to close and do remote or hybrid learning. People couldn't add daycare or childcare to the mix, especially if they were seeing a pay cut. So, if they had to walk away from a job, that meant they would also be losing an income they relied on. I had a lot of friends need to leave their jobs to stay home with their kids, and my husband saw a lot of his co-workers losing their jobs or being furloughed. No one knew when all this Covid stuff started how long we would be affected. And, now as I write this post, an hour before midnight and the start of December, it is looking like Covid will be around for most if not all of next year. So, we all have to take a step back and look at our finances, and make sure we are ready for the unexpected. The holidays are also upon us, which means we will be spending money for gifts for kids, family and friends. While we want to try and keep things as normal as possible for our kids, we also have to be realistic and know we can't be frivolously spending either, as tomorrow we may not have a job or get sick with Covid. We are living right now with so many unknowns, but have to make sure we know where our money is going when our paychecks come in each week or bi-weeekly.
I found a few helpful tips from Forbes that I wanted to share with you, as wind down the year, in hopes it will help you take hold of your finances and try and develop a budget that will work with your family as we brace for my Covid uncertainties. Case numbers are going up, kids are being sent home to remote learn more and more now, and you don't know if you will have a job in the new year. So, now is the time to start thinking about the 50/30/20 budgeting rule, and figure out your needs, wants and savings.
Retooling Your Budget in 5 Easy Steps:
1. Start With Your Income and Assets --
"There are two sides to budgeting: what you spend and what you earn. If your income has already taken a hit because of the Coronavirus, you simply can’t continue to budget your money the same way.
The first step in budgeting amid Coronavirus concerns is figuring out what your new baseline for income is if your hours have been cut or a job loss or layoff has affected your household. This can give you an idea of how deeply you’ll need to cut your budget.
2. Categorize Your Budget Expenses --
Cutting costs can make getting through the current financial situation less stressful. Before you can do that, however, you first need to understand where and how you’re spending.
The key is to put every expense in your budget into its own categories. Another way to think of it is like this: must-haves, need-to-haves and nice-to-haves.
3. Eliminate or Reduce Nice-to-Haves --
If you’re in disaster or emergency budgeting mode, prioritizing your expenses matters. For example, paying the rent or your mortgage and keeping the lights on should naturally take precedence over buying new clothes.
Some of the extras you may be able to immediately cut from your budget include:
Dining out
Entertainment
Clothes
Travel
Extracurriculars for kids
Electronics and gadgets
Gym memberships
Unnecessary subscriptions
Ordinarily, removing these things from your budget might be painful. But if you’re currently under a shelter in place order or you’re simply being diligent about social distancing and staying home, then cutting out these expenses may be less of an ordeal.
4. Revisit Your Essential Spending --
Once you’ve cut the fluff out of your budget, you can take a second look at your essential spending.
Start with what’s likely your biggest expense, which is housing. If you’re a homeowner, there may be a silver lining amid the Coronavirus crisis, in that the federal stimulus package includes relief for those with federally backed mortgage loans. If you have an outstanding mortgage and you’re concerned about falling behind on payments, don’t hesitate to reach out to your lender. They can walk you through what your options are, if any, for reducing or suspending your mortgage payments temporarily.
Something else to consider: refinancing your home loan. With mortgage loan rates at or nearing historic lows, you may have an opportunity to refinance your mortgage at a lower rate. If that results in a lower payment, that could save you money on housing costs. Keep in mind that refinancing may require you to pay closing costs, unless you’re looking into a no closing cost refinance.
5. Spend Strategically to Save Money --
While cutting back on spending can help make budgeting easier during a financial crisis, it’s likely that you won’t be able to stop spending completely. But there are some ways that you can save money as you spend, starting with using cash back apps.
Cash back apps pay you back a percentage of your purchases in cash or rewards that you can redeem for cash. So if you spend $100 on groceries or $20 on take-out, you might be able to earn 3% or 5% of that back.
These apps can be paired with cash back credit cards to double up on rewards. But it’s important to be cautious about charging expenses on credit cards when your income or financial situation is uncertain.
While you may save money by earning cash back, you may hand it right back to the credit card company in interest charges if you carry a balance. At the end of the day, creating new debt can work against you if you’re trying to minimize spending and stretch your dollars as far as possible."
As I mentioned about, I have been using a free and easy to use budegting tool, which is one of many available from the Pigly website. Pigly offers a wide range of tools from savings, budgeting, retirement planning, mortgages, auto loans, personal loans, and so on. You can check it out, and get other great free financial resources available by visiting https://pigly.com/budget/.
So many people were banking on extra money in their unemployment checks or a second stimulus check, but neither happened. Now, we have to sit down and review our family budget, and plan according for the new year, which is quickly approaching. I know talking finances is never fun, especially in a time like this. But, it needs to be done, and will help you out in the long run.
Additional useful resources to help protect your finances can be found at:
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