The coronavirus pandemic has ushered hard financial times for many and it’s not yet over. Thankfully some aspects seem to start getting back to normal slowly. But even though progress is being made and a lot of businesses are re-opening, that doesn’t mean the financial situation of everyone is starting to also look better. We are still living hard financial times and having to deal with the aftermath of the pandemic not only on an economic level but both personal and global.
Knowing how to budget during challenging times is crucial if you want to get out of the pandemic without more debt or, in the worst-case scenario, broke. Considering Financial Times reported that we might see a global food price inflation soon, things are likely to worsen before they get better. But if you take time to make a budget plan to fit the current situation, you can protect yourself better and become more resilient during hard financial times.
Why You Should Plan Your Budget for Hard Financial Times
If you’re a person who likes having control over their finances, then you probably know the importance of having an emergency fund. Like the name says, if an emergency that demands money comes up, you will have an ace down your sleeve. You will avoid stressful situations by having some money set aside, especially for these types of situations. As a plus, you won’t go into more credit card debt to cover the emergency cost.
So just like you plan and save money for emergencies, you should plan your budget for hard financial times. It might sound stressful at first to have to rethink your whole budgeting strategy and prioritize your expenses, but the sooner you start taking proactive steps, the better it will be for you when this grim period ends.
So, where do you want to be at the end of the pandemic? In more debt and with additional stress or in control of your financial situation? If the answer is the last option, then keep on reading, to see how you can plan your budget to get you through hard financial times.
How to Plan Your Budget to Get You Through Hard Times
1. Re-evaluate your wants and needs
The first thing you should do when you’re confronted with hard financial times is to start looking at your budget in terms of things you want and things you need. The key is being honest with yourself about what you can afford in the long term without getting into more debt. Analyze what your financial needs are; this might include rent, mortgage payment, and utilities, food, school tuition for your kids, and daily living expenses that are important to you and your family.
Then look at the second category, the things you want. These are different from the ones you need because you can put some of them on hold for when your financial situation will improve. Or you might want to save money to purchase them later. Maybe you want a new car or a two-week vacation at a retreat. These are all great things that will bring you joy, but unless you no longer have a functional car to get your job done or you’re in burnout in need of extended rest, then chances are it will be an intelligent financial move to put these on hold for now.
2. Know exactly how much money you make each month
Keep an inventory of how much money you make each month. This will help you know exactly what sum you can rely on each month so you can plan your budget accordingly. Try not to estimate your income.
If you have multiple sources of income, sit down with your calculator and note them all down, looking at your bank statements from the last three months. This should give you a ballpark figure of your total monthly income, with slight variations.
3. Beware of rising scams
As statistics show, online scams have increased since the pandemic started. In 2020, the FTC saw an increase of consumer complaints of up to 538,000. During hard financial times, we are more vulnerable, not only economically but also emotionally which can make us an easier target for scammers who are looking to trick you in a lot of different ways. Be more mindful and informed on the latest scams and trust your gut: if something sounds weird, it most probably is.
Read tips on how to protect yourself from scams.
4. Reduce your costs
This is one of the most difficult steps that you need to take. Remember what we said about the difference between needs and wants, now apply this notion to your monthly costs. Calculate the costs of your monthly essentials and then look at how you can reduce costs. For example, you can follow these steps to eat healthy on a budget.
Since we’re talking about food, consider cutting down on ordering in or going to the restaurant so often. Also included here could be downgrading some subscriptions, renegotiating your utility contract, and replacing the bottled water with a filter can. The key is to rethink your budget and make small compromises to reduce your costs.
Need help negotiating your subscriptions? Truebill is a budgeting app with a subscription negotiation option. They’ll do all the work for you.
5. Keep an eye on your bank account and your debt
It might sound strange, but now would be the time to check your bank account daily. Yes, you read that right: daily! This is because sometimes we get carried away, and we splurge a bit out of our budget. This is ok once in a while but the truth is, we do these things regularly without even realizing it. The aftermath is when you get to the end of the month and you ask yourself (again): how did I spend so much money, I didn’t even buy expensive things? Checking your account daily will keep you in more control of your unplanned spendings.
You should also try to stay away from more debt as much as you can. The worst thing you can do for your financial well-being would be to ignore making lifestyle changes to reduce your spendings and to accumulate more debt to support your wants. Try as much as possible to not make new debt and ask for help from family and friends if things are very difficult.
If you’re just starting to plan your budget, here are a few steps that will help you on your budgeting journey, through hard financial times and for sunnier days as well.
Check the financial marketplace for the best apps to help you budget and track your expenses.