Budgeting during a crisis: Financially surviving COVID-19
Published on: April 29, 2020
The COVID-19 pandemic has impacted us all to some degree. While the impact varies from person to person, health and finances are certainly top of the tree. From a financial perspective, there are numerous areas to consider, for example, job security and income. In these tough economic times, these are definitely top of mind, especially when we see long Centrelink queues and fears of a dramatically higher unemployment rate.
Small business owners are facing challenges as well, forcing many to review costs. These fears can often remain unresolved, with answers to your questions remaining up in the air due to the ever-changing situation and the inability to predict what will occur next.
However, we do have options available to us to better manage our finances during this time of uncertainty.
Understand the current and potential impact
It is important to sit down with your family/partner to first understand how your household is impacted by this pandemic. While this maybe a relatively easy conversation if you’re still employed and experiencing little short-term impact, it is worth discussing both the best- and worst-case scenarios. For example:
- If your job(s) becomes impacted, will you still receive an income, or will you be let go?
- Can you manage on one income and/or are you eligible for government help?
- If you have children, with schools/childcare being impacted, how does this affect your income?
- What expenses might you see an increase in and/or what new expenses might result? Try and estimate a dollar value.
The point of this is to do a little crystal-balling: You need to think not only about today, but what may also be on the horizon in the not-so-distant future. While it can be difficult to think about the above points now, it will put you in a better position than if you simply react to events as they happen.
Revise your budget and expenses
Another area to examine is where your money is being spent. For many people, social expenses, such as going out to bars and restaurants, have sadly been drastically reduced. The positive impact of this is that you will experience a win on the savings front and you now have the opportunity to save or pay down other debts.
When looking at your expenses some other areas for consideration include:
- Non-essentials: This may mean getting rid of unnecessary subscriptions or at the very least cutting down the number that you have.
- Alter your shopping list, swapping those more favourable brands for those that are on sale at the time.
- Only spend what you can afford. Avoid using your credit card, that way you won’t be surprised by a nasty bill at the end of the month.
It is also a great opportunity to formalise your budgeting process. We offer a budget planner that can help you build a budget that works for your specific needs. You can download it for free here.
It will have benefits
In doing the above steps, you will better understand the potential scenarios and the level of income you have to work with. If you find yourself in hardship there are ways you can improve your situation, for example, speak to your lender, utilities supplier, landlord/real estate agent, and enquire whether they can provide some assistance.
Most lenders are now providing repayment relief, while Telcos and other suppliers are offering a reduced payment structure. Alternatively, if you are still in a strong financial position it might be worthwhile to see if you can capitalise on the current market fall.
We understand how tough this period is and having the right support to manage your finances can make a real difference. At Life Money Co, we offer a 20-minute no obligation consultation to discuss your specific requirements free of charge. Click here to find out more.
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