How To Update Your Budget During COVID-19

How To Update Your Budget During COVID-19

Kim Pinnelli

by Kim Pinnelli
Senior Contributing Writer

April 3, 2020
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How To Update Your Budget During COVID-19

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With all the uncertainty around the pandemic, you need a budget now more than ever.

Many people are in a state of worry at the moment when it comes to finances and budgeting. Even if you have a job now, there’s still the worry about what is to come. We all need to be proactive in our efforts during coronavirus to budget in a more frugal way than before.

It's true that the government is working to provide relief in the form of Stimulus funds, rent assistance, and even payroll for small businesses, but now is the time to buckle down, create a new budget and prepare yourself for the tough times ahead we all likely face.

Here are our top tips to help get through the COVID-19 pandemic with your finances intact.

Update your home budget

It’s time to get really honest about where your money goes and where you can reduce your expenses. Take the time to go through your routine spending – pull your recent bank statements and spending logs, and be honest with yourself. A budgeting app can help you categorize your expenses, and review your spending in each. It may be painful, but it’s necessary.

Where can you cut? Here are a few ideas to get you started:

Focus on the essentials

By essentials, we mean your home, transportation, and food. Anything beyond that doesn’t belong in your coronavirus budget right now. Personal care, streaming subscriptions you don’t need, and impulse shopping on Amazon should be reigned in for the time being.

Trim optional memberships and subscriptions

What can you cancel without penalty? Now’s the time to do it. Watch out for cancellation fees, though – if you’re in a contract for your cell phone or cable service, you may not be able to cancel without a hefty bill. Call your provider to find out what options you have if you don’t think these services are necessary or if you want to try to lower your bills.

Consider putting extra debt payments on hold

Getting out of debt is typically a great idea, but if your take-home pay has been reduced, every extra penny needs to be made available to cover living costs and building your emergency fund. Make your minimum or required payments and put any extra funds into your emergency fund. You can catch up once the pandemic is over and things return to normal.

Cut costs where you can.

Even with essential costs, it may be possible to save. Now’s a great time to negotiate service rates for things like your Internet service, cell phone bill, insurance rates, and even credit card interest rates. Call around and see how much you can save – every bit helps.

Caring for your Retirement Accounts

The main worry right now is about your present-day finances, but that doesn’t mean you should stop caring for your retirement accounts. You’ll still need that money in the future, so you need to put a plan together on how to manage them.

Keep Saving For Retirement, If Possible

If you are fortunate enough to be able to continue contributing to retirement accounts, you should. While seeing the stock market averages fall can make you anxious right now, smart investors that are able to make investments are taking advantage of lower prices that, in the long run, should go up when the economy returns to normal.

Even if you have to reduce your contributions, don’t stop them altogether unless you don’t have an emergency fund set up. If you do need to access funds in your retirement account, understand the recent changes that may impact your decision.

Don't Sell Your Investments

Unless you have no other option, you should avoid selling your stock market investments. Especially if you’re young and don't absolutely need to access the money, you should leave your investments as-is. Investments that you sell now, after the stock market dive, will lock in the losses you have incurred.

Your investment values may be lower now, but if you’re in it for the long run, you’ll likely see your balances bounce back.

Dealing with Credit Card Debt

If you have credit card debt, you obviously still have to make your payments, but it may be a struggle right now. If you’re still employed, here are a few ways to help:

Applying for a balance transfer credit card

Take advantage of the introductory period and enjoy paying the principal down faster as you avoid interest charges for the time being. When things return to ‘normal,’ consider paying extra toward the balance to pay it off before the introductory 0% rate ends, but only if you can.

Apply for a debt consolidation loan

Take advantage of financing that may be available to you whether it’s a personal loan, cash-out refinance or home equity loan. Get a loan that makes your payments more affordable should the worst happen and you lose your job.

If you aren’t employed because of coronavirus, consider the following:

Contact your credit card company

Programs or help may be available, and you won't know unless you ask. Make sure you tell them you don’t have a job because of coronavirus, if that's the case. They might need to hear those exact words in order to provide additional help.

Ask for a lower interest rate

If nothing else, ask your credit card provider for a lower interest rate. If you’ve had a good payment history up until now, they may be able to reward you for it by offering a lower interest rate, which could make your payments more affordable.

Today, we all need to set a coronavirus budget or a barebones budget that focuses on the necessities in your life right now. Remember, this too shall pass –  it won’t last forever, but preparing for the worst is essential to get through this. If nothing else, it will give you peace of mind knowing that you have what it takes to make it financially through this time.

Everyone is in the same boat right now so there’s nothing to be embarrassed about or hide.