How To Turn Fear Into Action
Budgeting during economic uncertainty can be a daunting task. Building an emergency fund and reducing our debt load in the event of an emergency has become more real for everyone. With entire countries on pandemic lockdown and social distancing keeping everyone at home, entire industries have come to a screeching halt. Governments are crafting emergency health care plans, pausing foreclosures and sending their citizens’ stimulus checks in order to keep economies from crumbling.
With all of this economic uncertainty it is easy to throw caution and your budget to the wind. Fear will lead you to purchase a year’s worth of toilet paper, rice and bottled water on credit leaving you with a huge bill next month. It also can lead to stress shopping to comfort yourself while you are stuck in the house. These may be common responses to fear and stress but I’m here to remind you to P.A.U.S.E.
Before you YOLO yourself into major debt follow these 5 steps budgeting during economic uncertainty as your financial compass. The best way to combat fear is with a clear plan of action which is why I created this simple acronym to help you stay on the right financial path.
Step #1: Prioritize your spending. Sure it may seem like the best plan to rush out and stockpile toilet paper, paper towels, rice, beans and Doritos but is not in your best financial interest. The new normal of working from home, full-time parenting or being temporarily laid off will create new spending priorities. Focus first on housing, food and transportation before all other spending. Pay only the minimums on your debts. Repurpose any debt snowball payments to savings for now. This is the time to have as much cash on hand as possible.
Step #2: Adjust your budget. Pull out your budget and review your expenses are for the month. If you are working from home and the kids are out of school then you will be spending less on gas, tolls, school lunches, daycare, happy hour, etc. Take the money that you would normally spend in these categories and reallocate it into savings, meal planning, snacks and activities for the kids at home. These unusual times call for an unusual budget strategy. Click here for free budget worksheets to keep you organized.
Step #3: Unsubscribe from services. Now is the time to unsubscribe to services that are currently closed. In many instances some services like movie clubs or gyms may automatically suspend their monthly fee for you. If that is not the case review your subscriptions and cancel or pause any that you are not going to be using for the next few months. With more time at home it will become even clearer which of these services you actually use. If you are not using these items during a mandatory lockdown you really won’t be using them when life goes back to normal.
Step #4: Save money. This is the time to save, save, save. As previously noted idle hands, quarantine and sales emails multiplying in your inbox by the minute the temptation to spend has never been greater. Do your best to resist temptation. All of the money that you free up by reallocating your spending should be first put into savings. If you do not currently have 3-6 months in your emergency fund you may want to hold off on that new TV purchase for now. With talk of a recession looming when this pandemic dust settles you want to make sure that you are positioning yourself to succeed. The best way to do this is by saving as much as possible right now.
Step #5: Execute your plan. Now that you have prioritized, scaled-down and organized your finances implement your plan. Having a solid plan that works for you will give you the confidence to remain calm. Fear and stress leads to unnecessary spending and blown budgets. Do your best to avoid adding to your credit card debt at this time. Use your newly organized budget to pay cash for necessities. Maximize your grocery budget by shopping the weekly sales. Use your grocery store’s weekly circular to plan your meals for the next 2-3 weeks. Check places like Pinterest and The Food Network for stretch meal ideas using items that you already have in your pantry.
Create your new normal
These are unprecedented times but we do have the ability to thrive if we pivot our expectations accordingly. Once you have used 5 five steps to budgeting during economic uncertainty to your advantage, take some time to unplug. Read that book you’ve been putting off reading. Learn new skills and ways to reduce stress. Play more board games with your children. Spend more time talking with your spouse. YouTube has tons of free workouts that you can do for every fitness level. Now is a great time to check them out and revitalize your fitness routines. Take some time to Marie Kondo your household and purge unwanted items from your home that you no longer use. Take this time to position yourself to be as whole when the dust finally settles and we emerge from our homes. By strengthening your finances now you will give yourself the foundation you need to succeed long into the future.