7 Tips for Budgeting in a Tough Economy

For many Americans’ budgets, the coronavirus has changed everything. Millions have already lost their jobs. Tens of millions more are now faced with that possibility. Even if you’re lucky enough to be in a good economic position, shopping for fun is not a smart idea. Cutting back on unnecessary expenses is a smart hedge, should things take a turn for the worse. In tough times, you have to tighten your belt. Put together a new budget. Think through potential income reductions, ask what you actually need, and skip small indulgences. Here’s how to do it:

Identify Income Risks

First things first: You need to tally up the amount of income your household has coming in. If you have multiple sources of income, assign a score to each according to how likely you think you are to lose it. If you or one of your household members have lost their job, file for unemployment. Individuals who lose their job due to the coronavirus are being offered up to $600 per month in addition to their state’s unemployment benefits. Self-employed individuals are also entitled to these benefits, so it’s worth applying.

Count Your Assets

Take a moment to check your checking, savings, and investment accounts. If you keep cash at home, factor that in. How much total money might you have in case of an emergency? Although you should only touch your retirement accounts as a last resort, the CARES Act has temporarily suspended withdrawal penalties in some circumstances. You might also be able to get a low-interest or no-interest loan through your employer’s employee assistance program.

Watch for Fees

Credit or debit cards may be a crucial part of your normal spending habits, but using them can come along with a few risks. If you’re not careful about choosing the right card, you’ll run the risk of accruing sky-high interest rates or debilitating fees. No-fee or low-fee cards are out there, but you might have to do some searching before you come across the right one for you. If you’re hoping to make your current card portfolio work, don’t be afraid to call your providers about any and all fees and that show up on your bill. Carefully examining all of your cardholder agreements will give you a better understanding of what you should and shouldn’t use your card for, and always be sure to always pay them off as soon as possible — your credit score will thank you later.

Know the Meaning of “Necessary”

The next step is to eliminate any bill that is truly unnecessary. This may take some honesty on you and your household’s part. For starters, stop paying for services that you cannot use right now. You likely cannot go to the gym during quarantine, for instance, so call and cancel your membership. You can always reopen your account after the pandemic has passed. Not all unnecessary expenses will be so easy to cut. Can you ride your bicycle around town rather than drive your car? Can you reduce your meat consumption, which may make up the lion’s share of your grocery bill? Remember, this is temporary.

Prioritize Your Spending

After you’ve axed your unnecessary expenses, you need to prioritize your necessary ones: shelter, food and utilities. ● Rent or mortgage Your housing expenses likely make up the majority of your non-discretionary expenses. Keep a roof over your head first. If you’re unable to make rent, you should contact your landlord or mortgage company immediately. You may be granted an extension or pardon on your rent or mortgage payment. Some cities and states have even placed a moratorium on evictions during the pandemic. ● Utilities Next, you’ll want to pay your water, electricity, sewer, and trash bills. If you can’t pay them in full, you may be eligible to have them deferred or outright waived. You’ll need to contact your utility provider and explain your situation. The company may already have a claims process in place. ● Groceries Finally, you’ll want to look at your food expenses. It’s important during this time to only buy what you need at the grocery store. Don’t stockpile. If you don’t normally eat a food or use a certain cleaning product, there’s no reason to buy it now. If you’re struggling to cover your food costs, consider applying for the Supplemental Nutrition Assistance Program. SNAP can subsidize your food bills until you’re able to get back on your feet. If you can’t afford one or more of the above, ask whether you can move in with a family member. Although moving can make social distancing more difficult, you may be able to find a suitable arrangement. Some basements can operate as separate apartments, for example. Rent, utilities, and groceries are cheaper when split with a larger household.

Make Minimum Debt Payments

If you have outstanding debts, know what your monthly minimum payment is on each. Making the minimum payment will protect your credit score and save you from penalties and fees. If you have to choose between covering your essentials or making minimum payments, prioritize your shelter and safety first. Call your lender and tell them that you’re unable to make your monthly payments. Many major credit card providers are offering lower interest rates or waiving monthly payments for individuals who have been impacted by the pandemic.

Save Any Money You Can

It can be tough to save money when you are on such a tight budget, but try to let nothing go to waste. If you get change back after visiting the grocery store, stick it in a safe place. After a couple of trips, you may have enough to get a few gallons of gas or a prescription at the pharmacy. Finally, while nobody likes to accept charity, do not turn down help if it’s offered. That $100 from your mom may be enough to keep the lights on for another week or make a minimum payment on your credit card. Times are tough for everyone right now. Be smart with your money and generous with others, and we’ll all get through this together.