Why budgeting is important during COVID-19 and how to do it?
All of us are going through a very difficult situation. No one knows the end date when our world will be free of the CoronaVirus pandemic. None of us even know whether or not we’ll be able to get back to our normal life.
The scientists are burning the midnight oil to discover medicines and vaccines, but until that time, we will have to safeguard our physical and financial health.
Budgeting is an important element of safeguarding our financial health. So, let’s find out how we can improve our budget during this pandemic time. But before that, let’s understand the importance of budgeting.
Importance of budgeting during Covid-19 pandemic
- To be sure you don’t spend more
If you don’t have a budget, you can spend what you don’t have. I mean, there’s every possibility you use your credit cards and purchase without even knowing whether or not you’ll be able to repay the amount.
If you have a budget, you can curb your spending, especially during this pandemic time, when the financial future is a bit uncertain.
- To analyze your spending habits
Without a budget, you can’t analyze your spending. You won’t be able to know where you’re spending more or where you need to spend more and control somewhere else.
Therefore, you need to plan a budget keeping your needs and wants in mind. If you spend more on your wants, you won’t have enough for your needs.
- To keep a track of your financial goals
Even during this pandemic time, you need to set your financial goals. It can be building a hefty emergency fund for your rainy days, or to save for your child’s education.
Whatever be it, set your goals and determine how much you need to save every month. Include that amount in your monthly budget.
- To be on the same page with your partner
All of us know that financial stress is one of the major reasons for divorce. So, it’s quite important to be on the same page with your partner especially during this time when you’re experiencing a lot of stress.
So, budget together and avoid fights with your spouse on money issues. Instead, help each other to accomplish financial goals together.
How should you budget during this time?
Here are a few tips to plan a budget during this pandemic time.
- Build your emergency fund and plan for emergencies
When you’re planning a budget, you can overlook your emergency fund. Emergencies don’t give you a signal before occurring; it happens suddenly. So, you need to be prepared for it all the time.
First of all, you need to set aside an amount for your emergency fund. It will help you during the rainy days. We all know many people have experienced pay cuts and job losses during this COVID-19 time. If you have an emergency fund, you can sustain for a few months even if you face a job loss. The experts say to build an emergency fund worth about 5-6 months of your living expenses.
Apart from that, have a look at your insurance papers and check out the inclusions and exclusions in your policies. If required, opt for better coverage as per your requirement. Especially monitor your health insurance policy. Are you and your family well covered? Talk to an insurance agent and if required, opt for a better coverage and include that premium amount in your budget.
Usually, you pay for the insurance once a year. Divide the amount, which you have to pay, by 12, and include it in your monthly budget. Doing so, you won’t feel the burden of paying this amount in a month. In turn, it will help to maintain your budget, too.
- Think what is important for you
This is the time when you have to make choices. We need to be prepared for the worst days to come. An economic crisis has already started. So, you need to save as much as you can.
Assess what’s important for you. For the time being, you can cancel your memberships which you don’t require. For example, cancel your gym membership, magazine subscriptions, etc. which you can do without.
Look for other areas where you can save more. Don’t overlook small expenses. Just calculate how much it would cost you annually.
It will help you in making your budget successful and saving your target amount every month.
- Look for extra earning opportunities
An extra amount always helps to maintain your budget. So, look for extra earning opportunities online.
Choose the option that you’d like to do. It will help you to devote your leisure time to earn extra dollars. You can choose from taking surveys, providing online tuition, and so on.
- Take into account your income from all sources and expenses
While planning a budget, at first, take into account your income from all sources like your paycheck, rent, interest on deposits, dividends, etc. along with your extra income, if any.
Also, pen down every expense. To do so, you can write down every expense in a notebook. That will help you make the categories where you spend.
- Do not incur debts and repay existing ones
Debts are an absolute no-no, especially during this time. Do not incur debts that you can’t manage.
If you have credit card debts and payday loan debts, try to repay them as soon as possible. If required, take professional help. Doing so, paying off debts could be easier for you as the consolidation or settlement company will guide you to repay debt in a systematic way.
You can repay your payday loan debt and credit card debt together with the help of a consolidation or settlement program. If you opt for settlement, you can repay debt faster. Analyze your financial situation, discuss with a professional, and choose an option that suits you the best.
To conclude this article, I would like to mention that plan a budget even if you haven’t planned one before. You may not be successful during your first attempt, but with time, you’ll be able to plan a realistic one, which will help you manage your finances efficiently.
Author Bio: Phil Bradford is a financial content writer and an enthusiast. He has expert knowledge about personal finance issues. His passion for helping people who are stuck in financial problems has earned him recognition and honor in the industry. Besides writing, he loves to travel and read books.
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