We are all reeling from the pandemic that’s hit us and we’re worried not only about ours and loved one’s physical health, but we’re also anxious about our financial future.
If you’ve been laid off or furloughed, or see this coming soon, getting a handle on your income and expenses is more important than ever. This is the time to prioritize your money.
There’s a few tips to help:
Identify your total dollar amount in assets
Since you’ll be living on a reduced income or without an income for a certain period of time, you will need to know how much money you have on hand.
The best way is to do this is good old fashioned basic math. Add up every dollar you have in your possession and can use immediately. This doesn’t count equity in your material items (house, car, or whatever you think you can sell), but actual money. This includes money in your checking, savings, emergency fund, SHTF fund, even any spare cash in the piggy bank hiding in your closet (which might be more money than you think).
Count up all of your cash on hand and give it a number: for example, your total amount comes to $1932.61. Whether that is a great number or it sucks and won’t take you through the month, at least you know your amount. It’s better to know how much you have to work with, rather than be in the dark, guessing.
If you think you’ll be receiving any kind of furlough or unemployment money, don’t count it until you have it in your account and can use it. Getting some additional money is great and can be a lifesaver, but it’s a big mistake to factor in money you are expecting, but don’t have yet to pay bills. Only work with the number above, anything over that is the cherry on top.
Make a list of expenses for your current lifestyle
If you don’t already have a budget in place (and you really should, but I know it can be a pain in the butt), then make a list of your monthly expenses. To give you an idea, here’s a list of my expenses:
- Utilities: Water, garbage, electricity, gas,
- Cell phone
- Credit Card
- Car: payments, insurance, gas, maintenance
- Insurance: Earthquake
- Medical bills
- Home maintenance and improvement
- Personal care
- Gifts: Birthday and other
- Software subscriptions
- Gym fees
- Dining out
This is a short list. Depending on your lifestyle, you may have school-related or child-related expenses. Think of everything you spend money on during the month. If you get stuck, go over your statements.
Attach a spending amount to each category
A bank statement comes in handy for this. Comb through your expenses from the previous month and attach a dollar amount to each of your categories. Add it up and this is approximately your monthly spending amount number. It helps if the number comes close to the total on your bank statement, but don’t worry because a bank statement is only a snapshot of an active and flowing system of a budget. However, if it’s off by a wide margin, look over your statement to see if there’s an anomaly or a category you forgot to add to your expense list.
Now you have your total spending money amount and your total monthly expenses amount. Don’t worry if this isn’t to the penny accurate. You want to get a rough idea of approximately how long your money will last.
Prioritize your spending money
This is where you get down and dirty with your money. The intent is to spend minimally. Go through each category and determine if it’s essential for you to spend money on that right now. If not, reduce or cut out the categories that are non-essential, such as dining out, entertainment, clothing, personal care, etc. These things can wait for now.
Also, you may want to switch to paying the minimum on your credit cards. While you have reduced money coming in, you definitely don’t want to charge on your credit card! All this work you’re doing is to keep from spending more money than you have.
Get to the bare bones of your spending list, which may look something like this:
- Mortgage or rent
- Car expenses
- Student loan
- Cell phone
- Medical expenses
Again, this is a short list. You may have other expenses I haven’t listed that must be paid for you to continue living life.
Defer payments if you’re comfortable doing that
Since the pandemic is a national issue, you are not alone in this. You may have some leeway on deferring critical monthly bills, but you must take action to set up a deferment plan with your payor.
For a great resource to start your search, go here.
For example, my banks are offering to defer two payments for our car loans and three monthly payments towards our mortgage. That is a great reduction of expenses for a couple months. If you have regular monthly payments, call or go online and see if there’s any way you can defer or place a hold on your account. This also includes medical bills, gym fees, rent, student loans, or any other bills you might be able to delay. You won’t know unless you look into it, so try to get as many monthly bills delayed as you can, especially if you’re going to run very short on cash.
Here’s the important part: make sure you understand any additional fees, payments, or increase in payments you’ll have once you start paying your bill again. I can’t tell you what that will look like, since I don’t know your bills. It’s up to you to understand if or what extra amount of money you may need to pay and if it’s worth delaying your payments or not. Always make sure you know what you’re getting into before you make the decision.
Time to put in your survival budget
Now that you have a slimmed down expense list and you’ve done some deferred payments, determine how long the money you have in the bank will last.
If you happen to get other income, such as unemployment or a stimulus check, you can readjust your budget, but only when you get the money, not beforehand. Any income is kept and spent towards your survival budget until you start receiving a regular income again.
And the time will come when you get a regular wage again. Until then, put your finances in survival mode and keep yourself safe.