Do you have an idea how to budget better in light of all the challenges this health crisis poses to your finances?
There is no question that the past few months have been tough for a lot of people. Their health was put to the test when the virus spread across the country. It was so severe that it overwhelmed the healthcare industry putting several hospitals to work in maximum capacity. This led to several people getting infected with the virus.
This forced the hand of several businesses to close down and let their employees go. This is one of the biggest reasons why a lot of Americans lost their jobs or placed on furlough. For some, they were able to transition to an online work-from-home setup. They are fortunate since they still have work and their income is not that much affected.
In all this, the question for most people was how to budget better to make their finances work. This is true especially for those who lost their jobs or asked to put in fewer hours at work. The income coming into your household is not what it used to be. This will force you to change and adapt. Otherwise, you will find your finances in the red.
It is important that you be able to budget better because times have changed. The pandemic shook the whole world and the effects are far-reaching. The University of Minnesota shares that the country saw a 14.7% unemployment rate in early 2021. This equated to over 20 million jobs lost due to Covid. From huge corporations to your household budget. If you want to take better control of your finances, your budget is your first step. Here are a couple of things to help you manage your budget better.
Revise your old budget
If you want to know how to budget better, you need to understand that your budget can change over time. As such, you need to adjust it according to your current situation. If you lose your job, you need to quickly rearrange your budget to make sure that you are able to cover all your expenses and meet your payments with what you have.
If you fail to adapt, you will quickly lose money with all the payments and bills you have to pay every month. Soon, you will no longer have any funds to cover your expenses. This is where you begin to make decisions that could make it more challenging for you to recover in the future. You might begin to use your retirement savings or even take out an equity loan on your home.
But if you are able to adjust your budget right away, you will be able to get in front of your payments. You will see which ones you need to prioritize and which you can put off. It might be a good time to stick to a minimum payment on some accounts as long as it keeps your account current. You can also start reaching out to some lenders to inform them of your current financial situation. They might be able to work something out for you.
Save up for emergency fund
Trying to figure out how to budget better at a time when there is a pandemic will involve your emergency fund. As the name suggests, this is the fund you use in case you run into some unexpected emergencies in life. It can range from anything as small as a broken appliance at home to something as severe as losing your job.
There are a lot of ways to save up for your emergency fund. Some people will tell you to target 6-month’s worth of expenses so you can live off of it for 6 months. Others will tell you to target 12 months. Then there are some who are more conservative and will suggest aiming for a $1,000 reserve fund to begin with.
What you choose will depend on your current situation. If you are in a position to save up for 6 or 12 months or even longer, go ahead and do so. If you can only start with $1,000 or even $500, start with that amount. The important thing is you start saving for it. When you build up that habit, you will soon be doing it consistently over time and you will see your emergency fund grow.
Limit your debt obligations
If you find yourself asking “how to budget better?” one important decision to make is to limit and lower your debt obligations. If you already have them, find a way to pay them down more aggressively. This will take a lot of work. Prevention is also a good option where you choose to stay away from unnecessary purchases.
Aggressively paying down your debt usually means two things – increase income or lower expenses. The extra payments you will put towards your debt obligations would come from your extra pay. If that is not possible, then the savings you get from lower expenses would shoulder that additional patent. It is also possible that you do both to help you make the most of the extra cash on hand.
Stay on top of your investments
It will also help you budget better if you make it a habit to stay on top of your investments. You do not have to memorize all the little details but be sure you know the basics of where your money is. Where did you invest your money and how are they doing? Are you on track to getting the returns you projected when you started investing?
If you are trying to figure out how to budget better, knowing where your money is will be a big help. It will even be crucial information in case you need to make some changes in your monthly payments. If you are ahead of schedule for one investment, you could probably slow down or reduce what you are putting in so you can cover some basic needs at home. This is how you can make informed money decisions with crucial financial information.
Diversify your income
If you are trying to find answers on how to budget better, one thing that can give you the edge is diversifying your income. If you have different sources of income, it would be a little more challenging to stay on top of your budget. But this will help keep you at ease and lower down your stress in case you lose your job.
When this happens, you will still have money coming in. it may not be as much as before but you will at least have some income especially for your needs. Also, you will only have to look to replace a portion of your overall income and not the whole amount. This will be a lot easier for you to do especially when you are pressed for time.
Have a bare-bones budget
Just like most people would say, you need to plan for the best but always be sure that you are also prepared for the worst. And when it comes to your budget, you need to have a bare-bones budget ready. This will make adjustments a lot easier when you need to because you already have the budget ready to go. You can also have the chance to try it out to see how you can improve it further.
How to budget better? Try living below budget
If you are having a difficult time cutting down on expenses, a good strategy is to live below your means. Eminetra shares that the pandemic taught people that tomorrow is not guaranteed. It is best to prepare for emergencies that could come and living below budget is one of them. For some people, they simply refer to this as a frugal lifestyle. This is where you choose to live below your budget. This helps you look for creative ways to cut down on costs around the house. It can be anything from food to utilities and even your house payments.
You can start to buy in bulk and plan your meals for the whole week to save money. Not only will you save money but actually serve healthy and delicious meals for your family. If your family is used to going out to watch a movie, you can have movie nights right at home. Make you own popcorn and drinks and stream movies you like. You can even set up the living room to look like a movie house. Use your creativity and imagination.
How to budget better is a question a lot of people are asking in the midst of the health crisis. It will certainly be a challenge but not an impossible task.