It is crucial to be able to prioritize your budget even with the health crisis still ongoing. There is no doubt that your household budget is one of the most important financial tools you need to manage your money at home. A well maintained and comprehensive budget at home can help you get through some of life’s most challenging financial situations including this pandemic.
This health crisis has proven to be one of the most difficult challenges for people. For most people, if not all, this is their first time going through a pandemic. The last one in recorded history according to the CDC was the 1918 influenza pandemic. This was caused by the H1N1 virus which claimed about 50 million deaths globally where about 675,000 coming from the United States.
The health crisis has found its way into people’s daily lives impacting their finances deeply. As people were forced to stay at home to reduce the rate of transmission, businesses had to change as well. This could have forced you to prioritize your budget since several companies needed to cut down on operational costs. This meant shifting schedules at work, being put on furlough, or completely being let go.
This meant that your income could significantly go down and put your backs against the wall. It will be a lot more challenging if you do not have any reserve funds set aside for these types of situations. This makes it all the more important to manage your budget a little better during these times. Here are a few things to keep in mind.
Make sure you cover all your basic needs
When you start to prioritize your budget, you need to make sure that your basic necessities are always on top of the list. Basic needs like food, housing, utilities, and even medicine need to be covered first before anything else. New clothes, expensive take out food, and new gadgets can take the backseat at this time.
This is basically where you need to separate your needs from your wants. Take food for example where it can be both a need and a want. You need food to survive but you might also use the same thinking to convince yourself you have to buy the expensive kind. If finances are tight, you need to stick to a frugal budget.
This means you can cook and prepare your meals in advance at home rather than ordering take out every single day. The more convenient it is, the more expensive it can get. Set one day in a week where you can prepare meals for your family. Prepare them ahead of time so you do not have to cook from scratch for every meal.
Set aside money for your emergency fund
This pandemic has underscored the importance of having some form of reserve funds. This emergency fund will help households to continue meeting their expenses even with their income affected by the crisis. The question now is how long can their emergency fund sustain their budget. ABC shares that about 40% of Americans cannot cover a $400 emergency. This is why it is important to prioritize your budget right now.
For a lot of people, it might seem to be a daunting task to begin saving up for the rainy day. The idea is to start with a small amount and build up your way from there. This is because the goal at the beginning is to create a sustainable habit you can stick to for a long time. Once that is embedded and part of your routine, increasing the amount is a lot easier.
If you do not start saving small now, you will find it difficult to set aside a big amount in the future. Build the habit first and include it in your routine. This way, it is easier for you to save money continuously. You need to prioritize this fund in your budget so you can support your expenses when you encounter emergencies in the future.
Increase the gap between your income and expense
One of the ways for you to prioritize your budget is to make sure that you continuously find ways to increase that gap between your income and expenses. This is a two-step approach where you look for ways to lower down your expenses while identifying opportunities to bring in and increase your income every month.
At a time when there is a pandemic and your income is affected, you might need to strip down your budget to its very core. That is if it is not putting food on your table, a roof over your head, or keeping the lights on, you have to think about the expense. It would help if you can make a comprehensive list of all your expenses and start looking at them one at a time.
As you do this, it will be a big boost to your finances if you can identify and work on potential income sources. One thing you can look at is taking an income-positive hobby. This is where you work on an activity you already love doing while earning from it. It can be anything from baking, cooking, painting, or even being able to fix anything around the house. You can offer your products or services to friends and neighbors. Setting up an online shop is relatively easier as well compared to an actual physical store. This way, you can reach more potential customers.
Focus on high-interest debt payments
Once you start to prioritize your budget, it can help if you take a look at your high-interest debt payments. You might not think much about it but you are actually losing money over time when you stick to a regular payment with high-interest. There is a good chance that high-interest payments are unsecured debt like your credit card charges and even payday loans if you have any.
The health crisis could have driven you to use unsecured debts since they are easy to tap into. This is why you might see your credit card dependence increase in the past few months. As you struggle to make ends meet, you increase your card use. You need to make sure that you are able to manage your payments to stop your financial bleeding.
One way is to consolidate your credit card debt under one low-interest card. There are even lenders that offer 0% on new credit card applications. Just keep in mind that these types of cards also fall under a promo period. It is best to pay the balance before it lapses because you might pay a higher rate than before.
Involve your family
The health crisis has put everyone in a different and oftentimes difficult financial situation. It is challenging enough to take it all on your own that is why you need to involve your family. If you are married, this has to be a husband and wife approach. You can also let your children in on it if they old enough. You need to understand that people that matter to you will be affected by any changes you make in your finance. It is better to tell them early on so they may be able to help and support you.
You need to prioritize your budget in order to stretch your funds and be able to cover all your expenses on your list. Once you fall behind, the tendency is to tap into any available fund which can set you back when it comes to your financial targets and goals. When that does not work out, you might start to consider high-interest loans just to get some cash. With the unemployment insurance boost still up in the air, you need to keep a close eye on your budget.