The pandemic is a serious health crisis, but it’s a financial crisis too. It’s rocked the world of millions of households financially. But, that doesn’t mean you can’t pivot and budget differently to make the most of this time.
Everyone’s budgeting needs change often. Staying flexible and aware is the key to knowing how to budget during the pandemic. Knowing where you stand and how to get back to a budget that works is key.
Take these steps to get yourself back on your feet.
Take Stock of your Situation
You can’t budget unless you know your income and expenses. Even if you think you know them, it never hurts to do the following.
Pull your bank statements for the last 6 months. Write down every expense and total up your income. This should show you where you stand since we’ve been in the pandemic for almost a year now.
Look over your statements and ask yourself – do you come out ahead, even in recent months or are you constantly grasping at straws trying to make ends meet?
It’s okay if you are, this is why this step is necessary. Getting honest with yourself is half the battle. Once you know where you stand it’s easier to figure out your next steps. Be as honest with yourself as possible during this process so you get the most out of your budget.
Prioritize your Expenses
Now that you have your expenses written out, prioritize them. First split them into two categories – needs and wants. Go over the list carefully. It’s easy to name something a need when in reality, you could live without it.
Needs are expenses you must pay to survive. Housing, transportation, food, and basic clothing are needs. You need a place to live, a car to get to work, food to eat, and clothing to wear.
Wants are more subjective. They are anything you spend money on that you don’t need to survive, but you’d like to have. It could include cable subscriptions, unlimited data on your cellphone plan, name brand clothing, going out to eat, or salon appointments.
Everyone is different and everyone needs room in their budget for ‘wants’ but knowing how much money you have available for non-essential expenses is important.
Once you list out your ‘wants,’ consider listing them in order of most important to least important. When you budget, you’ll know which expenses you want to prioritize and which you can live without for now.
This doesn’t mean you can’t add them back later, but for now, you need to cut back to make ends meet.
Look for Places to Cut Back
Here’s the tough part.
It may be time to cut back. Look at your prioritized list of expenses to start. The items on the bottom of the list should be easy to eliminate. Be flexible, but not so much that you feel restricted and rebel against your budget.
Every household is different, but here are a few common areas people cut back:
- Cut the cord on cable
- Cancel gym memberships
- Cancel online memberships or subscriptions
- Eat out less (meal plan at home)
- Bring a brown bag lunch to work
- Shop at discount grocery stores (like Aldi)
Look for Ways to Supplement your Income
If you cut back and find you still don’t have enough to meet your needs and wants, look for ways to supplement your income. During the pandemic, millions of people increased their income through both passive and active strategies.
Here are a few ideas:
- Sell crafty items – Are you crafty? Set up a store on Etsy or just list your items on Facebook Marketplace. You can make money doing something you love.
- Tutor online – If you have a teaching certificate or graduated college and can help kids learn, consider tutoring online. You can also set up your own gig, tutoring over Zoom or Facetime.
- Start a side gig on Fiverr – If you have a talent small businesses could use, set up a gig on Fiverr. Writers, web designers, voice-over artists, and transcriptionists all make a great living on Fiverr. You set up your gig with your rates and terms and can supplement your income working from home.
- Invest – Now may not seem like the best time to invest especially if you’re trying to get on a budget, but it’s a great way to earn passive income. Sign up for an app like Acorns and invest your spare change. Acorns rounds up your purchases to the nearest dollar, sweeping the change into an investment account. Leave your funds to grow and you’ll earn passive income.
- Get into the sharing economy – If you’re comfortable working outside the home, consider driving for Uber or Lyft or shopping for Instacart or Shipt. You choose your shifts and earn a fee plus tips.
Create an Emergency Fund
An emergency fund is crucial during these unpredictable times. One emergency, even a small one can ruin your budget and put you in financial distress.
Your emergency fund should have three to six months of expenses in it. For many, especially now, this is too hard.
Set a smaller goal – save at least $1,000. That should be enough to get you through a standard emergency and keep you out of financial distress.
Any money you can put aside for an emergency will help.
Set up your New Budget
Once you know where you stand, create your new budget.
Here are a few budget ideas to get you started:
- 50/30/20 budget – The 50/30/20 budget helps keep you within certain parameters. With this budget, 50 percent of your income is designated to cover your needs or necessities, 30 percent would cover your ‘wants’, and 20 percent should cover your savings and/or debt payoff.
- Zero-based budget – If you’d rather budget every dollar, ensuring that you get the most out of your income, the zero-based budget is a good option. You budget every dollar down to $0. If you hit $0, this means you put every dollar to good use, and not because you spent every dollar, but because you budgeted every dollar, which includes putting money in savings and paying off your debts.
- Envelope budget – If you are a spender and need a more visual way to save money, the envelope budget is a good option. You set up a budget and envelope for each spending category. In each envelope, you put the allotted cash for the category. When you spend the money in the envelope, you’re done spending in that category for the month.
This works best with food, groceries, household goods, and other areas you overspend. Your fixed expenses, such as housing, utilities, and transportation can remain digital.
Tips to Make it All Work
It may sound overwhelming at first, but budgeting, even during the pandemic, isn’t always as hard as it seems. Here are quick tips to help you stay the course.
- Don’t forget about annual expenses you may overlook. Car insurance, real estate taxes, and homeowner’s association dues are commonly overlooked. When they pop up, they can cause financial issues. Include them in your budget, putting aside 1/12th of the total each month.
- Contact your lenders if you’re having financial trouble. Don’t just ignore your bills if you can’t cover them. Lenders often work with you if you are honest with them. Let them know of your financial issues, and see how they can help.
- Use coupons and shop sales as often as you can. We all need to grocery shop, but we don’t need to overspend on food. If you don’t have discount grocery stores near you, watch the sales and use coupons and cashback apps as much as possible.
- Don’t look at cutting back as sacrificing. Think of it as providing for yourself and your family. You’re easing up on your financial obligations to make life easier for you. Less stress equals better health and we all need that right now.
- Know there’s help if you get into a bind. Life happens even to those who plan the best they can. If that happens, don’t beat yourself up. Know there’s help out there and that you’ll get through this.
Creating a budget during the pandemic may seem impossible especially if you lost hours or your job. It’s not as hard as it seems, though. Work with what you have, cut back where you can, and know there is help out there.
If you need cash fast, we’re here to help. Contact us online or call 855-374-5626.