Coronavirus is already straining health systems around the world, and this is an unpredictable time for everyone regardless of their personal circumstances. However, the pandemic has also had a massive impact on the world economy, and workers in a variety of industries are facing an uncertain future.
In this article, we’ll highlight three of the best ways to update your budget in response to COVID-19 cash flow constraints that could be putting pressure on your business. These tips will help you get your money in order no matter where your finances are right now.
Start with Your Income
If you’ve been laid off or lost hours due to coronavirus, your first priority should be changing your budget to match your new income. Keep in mind that you can take advantage of additional unemployment benefits if you’ve recently lost work.
For example, if unemployment will only cover 75% of what you were earning, you’ll need to start spending 25% less in order to balance your budget.
You may want to save an even greater percentage of your income than usual. Increasing your savings rate will give you more money to fall back on in case you’re out of work for an extended period of time.
Reduce Unnecessary Spending
Once you’ve identified your spending target, you can start making more specific adjustments in order to reach that goal. Day to day necessities like food and medicine should always come first—never put your health or safety at risk for the sake of your creditors.
It should be easier to cut back on transportation, eating out, shopping, and other common expenses, especially if you’re staying home during the outbreak. Try to stick to your new spending habits rather than immediately readjusting when things go back to normal.
Plan to Pay Off Debt
You should always try to make at least the minimum payment toward all debts in order to maximize your credit score and avoid as much interest as possible. That said, there’s nothing wrong with trying to make other arrangements when you’re dealing with financial hardship.
If you’re struggling financially, contact creditors as soon as possible to work out a payment plan. You may be eligible for relief for credit card balances, mortgages, student loans, and other types of debt. Short-term relief will make your budget last longer if you’ve lost your source of income.
Coronavirus is affecting everyone differently, but anyone can improve their financial situation by taking these three steps. Even if you haven’t been personally affected by coronavirus, this is a good reminder that it’s important to be financially prepared for any situation.
Guest post courtesy of Luke Hayward