Published in: Banks | April 9, 2020
How to Get Your Budget Back on Track After Coronavirus
By: Christy Bieber
You can recover from the financial impact of the COVID-19 pandemic with these simple tips.
The COVID-19 pandemic is a once-in-a-lifetime economic and public health disaster that is unlike anything most Americans have ever experienced. It has left people afraid for their health and coping with major economic uncertainty as businesses are forced to close to slow the virus spread, leading to record unemployment numbers.
If you're like most people, your income and lifestyle both changed due to the novel coronavirus. But you probably also have hope that the world will one day return to something resembling normal. And when it does, you'll need to get your budget back on track. Here are a few key tips to help you do that.
Take a close look at the numbers
Coronavirus may have changed the amount of income you have available to budget with if your job or business was impacted. If you have less income now, you'll have to rework your budget to account for the drop.
You might find you need to make a few big changes to your lifestyle. You could think about downsizing to a cheaper car or even look for a cheaper place to live to cut your monthly expenses.
If you can't or don't want to make these kinds of big changes, look at where else you can reduce spending. You've probably been cooking at home more and going out less during the crisis and you can continue to keep entertainment and dining-out costs low until your income recovers. Even if you're eager to start going out again and supporting your local businesses during the recovery, you need to get your budget on track first.
Whichever approach you decide on, the key is to make sure you've looked at the numbers and are confident your spending won't exceed your income.
Prioritize (re)building your emergency fund
Many people will have to tap into emergency funds during the coronavirus crisis. If you're one of them, one of your top budget priorities should be to rebuild your savings.
The pandemic has underscored the importance of having lots of emergency money and you don't want to be caught off guard if something goes wrong again. To make sure that doesn't happen, keep your spending as low as possible on non-necessities until you have enough saved to cover three to six months of living expenses.
If you didn't have an emergency fund prior to the COVID-19 pandemic, get serious about building one now as the crisis shows that even a good economy can turn on a dime. Open a high-yield savings account and budget in contributions every single time you get a paycheck so you can build your emergency fund ASAP.
Prioritize debt paydown
If you were forced to borrow during the coronavirus crisis, figure out how you can pay back what you owe as quickly as possible. This shouldn't come at the expense of building or rebuilding your emergency fund, but you definitely want to make extra payments so you aren't stuck with your debt for years to come.
If you used high interest debts such as credit card balances, consider refinancing with a personal loan if you can get one at a low rate. Or transfer the debt to a balance transfer card with a 0% promotional interest rate so you can avoid paying interest as you work on debt paydown. Be aware that there may be an upfront fee for the transfer.
Whether you refinance or not, set a goal for when you want to get your debt paid off. Then focus on paying one debt at a time (either the one with the lowest balance or the highest interest rate) and make automated payments each month. Build this into your budget as a must-pay expense after covering other essentials and emergency savings.
(Re)consider your long-term financial goals
The coronavirus pandemic may have changed the way you think about your lifestyle. Perhaps you really enjoyed spending time at home and now want to retire early. Or perhaps you got inspired to try to build a business because you don't like depending on your employer for a paycheck.
Think about whether your budget supports your new long-term goals. If it doesn't, it's time to rework it. Your money is meant to help you accomplish things that matter to you and your budget should reflect those priorities.
The coronavirus crisis will pass
In the midst of the coronavirus crisis, it's hard to think about what will happen after. But bad times always pass. When they do, take the chance to rebuild your finances. You can make them stronger than ever, even if you faced struggles, by making a budget that works for you.
These savings accounts are FDIC insured and can earn you 20x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 20x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2020.