Written by: Noah Rue
If you are like many people in the world, then it is likely that your career, income, and everyday way of life have been shaken up by the COVID-19 pandemic. During these times, it is especially important that your finances are in a good place. Those who had emergency funds may be coasting along okay, but people who did not prepare for the future may be in trouble.
The effects of the coronavirus might have put you in a tough spot financially, but with proper planning, there could be light at the end of the tunnel. Here are some tips to cutting costs, staying ahead of monthly bills, and making a plan in case a recession or global pandemic hits again.
A Budget Is Key
The first step to regaining control of your finances both during the pandemic and after it passes is to create a budget and stick to it. This process starts by taking the time to sit down and calculate how much money you are bringing in each month and then accounting for every recurring bill. Have all of this information written down or put in an Excel spreadsheet.
If you are the type of person who spends money when necessary but doesn’t keep track, then you may want to turn to technology for the assistance you need. A smart app like Mint can help to track your spending so you can see the trouble areas. Meanwhile, the Prism app helps you to stay on top of those bills, and you can even pay or schedule payment directly through the program.
It is crucial that you stay up to date on your bills because too many late payments could negatively affect your credit score. If the pandemic has put this score in a bad place, then you can start to repair your credit by paying off what you can on the larger bills to make your overall debt situation more manageable. Although it may be tempting, do not take out new loans during this time as new applications will result in hits on your credit that will lower the score 5-10 points each time.
If your budget shows that you do not have enough money coming in to cover expenses, then it is time to cut costs. Instead of asking what you need to pay, see what you can reduce or eliminate. If your hours have been cut at your job, ask if you can work remotely instead and save on gas. Those who are already working from home can cut out the daily Starbucks run and make their own pot of coffee that will be less expensive and last longer.
What else can you take advantage of now that you are at home more often due to social distancing? Many people hire professional cooks and cleaners, which can be quite expensive. With more time at home, are you instead able to handle these tasks yourself? This could also be a good chance to cut down on child care for kids not old enough to go to school. Watch them yourself and get some much-needed family time.
Another cut could include canceling a TV streaming service and just sticking with what is on cable. If you have turned to a service animal to help handle the anxiety of the pandemic and your care requires taking them to the vet, you may be able to write off the costs. If you have another expense that is just too much, do a search online for solutions that others have tried that you may be able to do as well.
Create An Emergency Fund
If you have money left over after all bills have been paid, then this might be a good time to add it to an emergency fund. Many people who have been hit by the pandemic are grateful that they saved when they did because this extra cash has prevented a lot of headaches. If you don’t have one yet, this is a good time to start just in case this happens again.
One of the best ways to add money to an emergency fund is to make the process automatic as a type of expense. Ask your job to put 10% of your paycheck into a savings account. That way, you can set it and forget it. Opt for a high-interest savings account with an annual percentage yield of over 1%, so your money can grow over time. Once you have the nest egg, only dip into it when absolutely necessary.
When money is tight, one way to add to your expenses and your emergency fund is to get a second job. Right now, many people are turning to the gig economy for side jobs like driving for a delivery service or freelance writing. In many of these jobs, you can work when your schedule allows, and if possible, you can put all of these earnings into your nest egg.
There is no way around it. Times are tough right now. But by taking a close look at your expenses and making smart financial decisions, you will see the light at the end of the tunnel.