In times of financial instability, every dollar matters – and that means it’s never been a better time to put a practical budget in place.
But, with the COVID-19 pandemic causing such economic unrest, even the most disciplined budget-keepers have had good savings and spending habits thrown off-course. To help you stick to a post-COVID-19 budget that helps you survive and, hopefully, thrive, try these practical tips for better budgeting.
Don’t blame yourself
Self-care is critical in any crisis but, while this is not the time to beat yourself up, it is still important to combine kindness to yourself with some firm rules.
Yes, your finances may have fallen into a bad space but you can make positive decisions to repair them and get back on track. First of all, forgive yourself. That over-spending you did during your online shopping frenzy may not have been the best decision you ever made but it’s done now – get over it. (But don’t do it again!).
As your financial health finds its feet, be flexible and understanding of your evolving circumstances and create a realistic budget you can stick to – even while your income is shakier than usual. If your finances are shared with another person, be sure to involve them in the plan. When you genuinely work together as a couple/partnership, things happen more smoothly.
Trim the fat
Your income might have been reduced – or completely lost – but you can recover and creating a carefully-considered budget is a critical step.
To build a budget that you can stick to, it’s important to understand how much money is actually coming in – and where it needs to go out. Consider cancelling (temporarily, at least…) some subscriptions and memberships that you don’t really need right now. Luxuries are lovely but in times of financial belt-tightening, they may need to be sidelined for a while.
By tracking every dollar that goes in and out of your bank account and limiting your spending to actual needs, rather than wants, you can get things in order again.
Focus on debt clearing
The two most popular methods of paying down debt are listed below.
Choose what works best for you but stick to it. Debt can seem over-whelming but it won’t go away by pretending it’s not there. Take action to make positive changes – today.
Pay off the credit card with the highest interest rate first. Put as much money as you can toward that bill—but still service the minimum payment (at least!) on all other credit accounts. Then, as each credit debt is cleared, roll the money you were paying into the previous card debt into the credit account with the next-highest interest rate.
By utilising this strategy, you can actively reduce the amount of interest you pay as you reduce your overall debt.
Some people find great motivation in this method – by actively reducing the number of debts you pay each month. Put as much money as you can afford toward the card that has the smallest balance. Of course, you still need to pay the minimum (at least!) on all other accounts.
As each credit card debt is cleared, roll the amount you were paying into that previous card into the card with the next-lowest balance.
Eventually, you’ll enjoy the feeling of paying less repayments each month and you’ll have your entire debt wiped off with some commitment and smart budgeting.
Keep saving money too
If you only deal with debt, it’s hard to stay positive and see that light at the end of your tunnel. Create a special savings account with a high interest rate and commit to adding money to the balance every week – even if it’s just $5. Seeing your debt go down, bit by bit, is a great feeling but it can be draining, so having the positive feeling of also watching savings go up, is a great balance.
Use budgeting tools to suit your needs
Choosing budgeting tools that make sense to you is a personal decision. Pen and paper? Or online tech tools? Excel spreadsheets can be brilliant for some and confusing for others but the good news is that, if you have a smartphone, there are lots of user-friendly apps that help you track each and every dollar.
Most banks and financial institutions also have useful budget/savings planners and calculators, so talking to them or checking their website may also be a positive start.
The impact of the pandemic has been difficult for lots of people – across a range of industries and life stages.
But, even though times may get even tougher for some, we will get through it.
Try to remain positive and be prepared to re-evaluate your financial situation every month, as things continue to change.
This won’t happen overnight but things will get better and with your debt dealt with, it’s one way to feel like you have made an important achievement that will have a long-term impact on your future financial wellbeing.
Remember – with debt cleared and a foundation of savings, you are putting yourself in a much stronger position to weather any future storms.
For more information about ways to handle your debts, talk to our experienced loan brokers at Lending Specialists today.