Experiencing a sudden change in income can be devastating. You may have a flood of feelings, including sadness, anxiety, anger or helplessness over the uncertainty of what comes next. One way to cope with these feelings is to be proactive and financially responsible during this challenging time. This article will help you understand options to help you maintain financial stability.
Evaluate your budget – Creating and sticking to a budget is essential for financial wellness. If you have one already—great! If not, establishing a budget (or updating an existing budget to reflect any recent wage changes) can help you stay afloat in this uncertain time. Follow these steps:
- Identify how much money you have coming in each month.
- List your necessary expenses such as insurance, transportation, prescriptions, bills, food, rent or mortgage, etc. You may notice a decrease in some areas due to being homebound. For example, you may not be spending as much on gas or public transportation. Calculate these savings and allocate the money to an emergency fund since the length of this pandemic is uncertain.
- Reevaluate optional expenses such as buying a morning coffee, dining out, gifts, recreational activities, etc. This is another area where you may be able save additional money. For example, you may not be purchasing food at restaurants as often as when you were working or now that you’re remote. Preparing your own meals can save a substantial amount of money!
- Calculate the difference between incoming money and money spent to see if you’re breaking even, or are over or under budget.
- Track your spending. The aim is to be under budget for financial security.
Prioritize your spending – After determining your budget, if you find yourself over budget, you may find it necessary to prioritize your spending. List the areas of spending by priority. For example:
- Essentials – Food, medicine, medical supplies
- Housing – Mortgage/rent, utilities
- Debt – Student loans, car loans, credit cards
Identify areas where you may be able to cut expenses. Could you…
- Cut or downgrade your cable package
- Switch to a less expensive mobile phone plan
- Cancel any non-essential subscriptions, such as for video game services or monthly “beauty box” or similar subscriptions
- Consider canceling things like magazine subscriptions now–you’ll likely be locked in until your next renewal date, but you can at least act now to make sure it doesn’t renew
What about car payments, student loan payments, or credit card payments?
Contact your lenders to see if they are able to offer any support or hardship plans during this time.