If you’ve lost your job or taken a pay cut because of Covid-19, you’ll need to cut your budget to preserve your financial security. Here are some tips for budgeting during the coronavirus pandemic.
See where you are
Your first step is a complete assessment of your finances. Start with your financial assets. Make a list of each financial account: checking, savings, money market funds, any stocks or mutual funds and retirement accounts. Did your company provide a severance or reduced pay during a furlough? If so, count that. Don’t forget state unemployment benefits if you receive them as well as any refunds you may be owed from canceled events or insurance companies that are rebating a percentage of premiums while their insureds shelter at home.
Next, list all of your monthly obligations, which will fall into two broad categories. One is monthly fixed costs for essentials. These are fixed obligations such as your mortgage or rent payment, homeowners association dues, car payments, insurance payments, loan payments — anything you must have for which you owe the same amount every month.
The other category of obligations you need to review when budgeting during the coronavirus pandemic is variable expenses, many of which are discretionary. These include utilities, groceries, clothing, travel, entertainment, subscriptions and the like.
Finally, take a look at your savings if you have them. How far will they go to cover expenses when you’re budgeting during the coronavirus pandemic?
Cut discretionary spending
Since housing, utilities, food, transportation and insurance are essentials, the first place to cut when you are budgeting during the coronavirus pandemic is your non-essential expenses. Here are some suggestions:
- Drop all subscriptions such as video streaming services, premium music streaming, subscription food deliveries and publications.
- Contact your cable or satellite service provider and explore dropping television channels and keeping only the Internet. If things get even tighter, drop the Internet and use the public library’s Wi-Fi for job hunting.
- Cook at home instead of eating takeout or going to restaurants.
- Stop buying clothes.
- Cancel your gym membership.
- If you’ve been paying to have your lawn mowed, car washed, or laundry done, start doing these things yourself.
- Eliminate everything possible that is not an essential living cost.
Savings on essentials
While you can’t simply stop paying for essentials when budgeting during the coronavirus pandemic, there are ways to spend less on them.
- If you are unable to pay your mortgage because of a job loss, check with your mortgage company to see if it offers a forbearance program that will allow you to defer or reduce payments temporarily. Be sure to get the plan confirmed to you in writing before you stop or reduce any payments. Keep in mind that you will repay the deferred amount at a later time based on the plan you work out.
- Talk to your mortgage company about whether refinancing to reduce your monthly house payment makes sense. But be cautious about taking equity out of your home through a home equity line of credit (HELOC). A HELOC provides cash, but if you are forced to sell later you may owe money at closing if you have little equity left in your home.
If you rent and are falling behind, talk to your landlord about your situation and work out a plan to reduce or delay payments. Again, get the agreement in writing. Many states have issued moratoriums on evictions during the coronavirus pandemic. - To cut utility costs, be extra vigilant about using as little electricity, water and gas as possible. Learn to live with temperatures that are a little warmer or colder by adjusting thermostats. On warmer days, open the windows and enjoy fresh air. Ceiling fans are a good alternative to air-conditioning. Wash fewer, fuller loads of clothes in cold water. Avoid running the dishwasher until it is filled to capacity. Shorten showers, landscape watering and other activities that use water. Replace old incandescent light bulbs with CFL or LED bulbs that use far less electricity.
- Most states have barred utility companies from cutting service to homeowners who fall behind because of a job loss. If you are unable to keep up with your utility payments, check the utility’s website for information on COVID-19-related relief programs.
Examine your cell phone bill and drop add-on fees for unneeded additional services. Unlimited data may be essential, however, if family members are relying on cellular service for work or school. - Hunt for bargains at the grocery store. Visit online couponing sites where you can print coupons for many packaged goods.
Related – The CARES Act: Financial Relief for Homeowners and Renters During the Coronavirus Pandemic
