It’s Time to Revise the Pandemic Budget
Budgeting is important at the best of times, but it is imperative to keep it up to date during this pandemic. COVID has likely changed your spending and saving habits, so you’ll want to track your budget more often than before, perhaps even on a daily basis. Here are some things to consider and steps to take to revise your budget in line with the new regulation.
Do not deny
Stress and anxiety are normal and no one wants to look at credit card statements during a financial crisis. But what you want to avoid is financial failure, the tendency to avoid or minimize your financial problems. It includes:
- I don’t want to talk about money, even when it’s necessary.
- Avoid opening bank statements or credit card accounts.
- You don’t want to know how much debt you have.
The dodging cycle only builds up unnecessary debt and creates more stress. To get out of this trap, you need to take control of your budget.
Limit expenses
List all your expenses and examine your bills carefully. It doesn’t have to be a complicated spreadsheet, you can use pen and paper.
If you didn’t have a tight budget before the pandemic, you might find costs you didn’t know about before — perhaps you could cut your electricity bill or cut your takeout costs. Be ruthless with spending you don’t really need.
Debt priority
Understandably, during a pandemic, you may not be able to pay off all of your debt, but you need to determine what should be paid first.
- Identify your top priority debt, which is the debt that costs your family the most or affects your bottom line: auto loans, child support, utilities, and rent.
- Next, create a medium priority debt list that covers important things like mortgages, student loans, and taxes. They can become top-priority debt if you ignore them, but have less short-term impact if you don’t pay them off right away.
- Finally, create a low priority debt list, which could include an unsecured credit card, medical bills, or purchases. Lower priority debts should not be paid off if it prevents you from dealing with high priority debt. However, low priority debt becomes high priority after you file a debt lawsuit.
Then, explore all of your options for COVID assistance, including federal eviction moratoriums and loan deferrals, and assistance programs that may be in your city or state. For issues not covered by government programs, try contacting your lenders directly as they may waive late fees, delay payments, or offer a consolidated payment plan with lower interest rates (although this may require a good or excellent credit rating above 670) … … When renegotiating, try to pick the day of the month when you can most afford to pay off your debts.
Create a budget
In the normal world, the 50/30/20 rule is ideal: 50% for needs, 30% for needs, and 20% for debt and savings, including a reserve fund. But that’s the cookie formula, and your spending is what really determines your budget. You may want to temporarily remove the wants from the formula so that the more realistic 60/40 rule can be applied, with a three-month emergency fund as part of that goal.
Consider working with a loan advisor
If you’re in debt and can’t keep your budget, consider credit advisory agencies, which are usually non-profit organizations that can advise you on your debts. Be prepared to discuss your financial situation, employment status and financial goals, as well as your regular income and expenses. As part of this consultation, you may be eligible for a debt management plan to make it easier to process your monthly payment.
Remember to take this one day at a time.
As with the pandemic, take it one day at a time. Get in the habit of checking your budget daily until you regain control of your spending.