The COVID-19 pandemic is taking its toll on many individuals and the world economy. Many small businesses are on the verge of collapse because of the reduction of income or halted their operations. Managing the finances is already challenging as it is but now that a crisis arises, there’s a need to be more sensitive when it comes to handling it. While the government and other private lending companies provide some monetary assistance, it is not a long-term solution. You need to do something to lessen the financial stress to improve your current and future situation.
Here are the budgeting steps to help you adapt to the current pandemic:
Assess Your Existing Budget
Assess your existing budget so you can modify it to match with the COVID-19 pandemic. Know how much you are earning and spending before and during the pandemic. This comparison will give you a clear picture of how will you modify your budget. For instance, if your income drops by half, you need to consider cutting some of your spendings to accommodate the essential expenses you will incur for the next few months.
Know How To Categorize Your Expenses
List your monthly expenses and categorize them to essential and non-essential expenses. It is to know what expenses you need to prioritize or to cut. Be more mindful of your expenses because you can’t spend more than you earn. And even if you have enough budget, consider reducing your expenses further. The more non-essential expenses you cut the better.
- Essential Expenses – These are usually fixed expenses, basic NEEDS, or those you don’t usually control. For instance, rent, food and essential needs groceries, loan payments, utilities, and insurance.
- Nonessential Expenses – These are usually variable expenses and “WANTS” you can live without. For instance, shopping, entertainment, unnecessary subscriptions, and restaurant dining.
Implementing some budgeting strategies shouldn’t mean you should really tighten every expenses you are making. Don’t be an extreme cheapskate, that is far different from being smart about your money. Drop the negative attitude towards ‘pagtitipid’, look at it as a guide for you to spend your money on the right things while income may be slow during these months. Also, don’t overcut expenses that will result you to experience some struggle. Remember, that is not the point of budgeting.
This might be the hardest tip among all of the ones listed here. Most of us have this tendency to spend money if we have some extra cash, but now is the time to change that. We don’t know how long this pandemic will go for and with that in mind, we should keep all extra cash we can have as an emergency fund. We continuously need to prepare for the uncertain future so we can protect our health together with our financial health.
Don’t forget to be physically healthy amidst this COVID-19 but being financially healthy is as important as it is. Remember, you should aim to retain financial stability especially in times of uncertainty.
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