Main Menu

Search form

 

It’s Time to Update Your Budget

April 30, 2020

Here's What You Need To Know

While the pandemic has upended most of our daily activities, it’s also done a number on many people’s finances. Job losses and cutbacks have been rampant, causing damage to many families, even if they weren’t directly affected by the virus. 

If you feel like it’s a good time to check spending and increase savings, you’re not alone. The United States Bureau of Economic Analysis has reported that the national savings rate surged to its highest since November 1981, up 13.1% in March, compared with 8% in February.

Now is the time to take a good look at your finances, make a game plan for the future.

If you already had a budget, that’s terrific! However, chances are good there have been a number of changes in your spending recently, and you may even be able to identify categories where you’ve achieved significant savings. Let’s walk through the basics of budgeting and what you should be looking for now. 

1. Track your discretionary spending. 

Tracking your discretionary spending is probably easier than ever since you’re not out spending $5 here and there on snacks or bottled water. Sheltering in place limits your opportunities to make impulse buys; in fact, while your income might be slashed, your outgo most likely has, too. Take some time to scrutinize your spending today compared with more normal months earlier in the year to identify categories that have changed. While your spending on groceries may be up, there are likely areas where spending is down or even non-existent—think commuting costs, work clothes, out-of-home entertainment and travel, along with expenditures related to kids’ activities. 

You can potentially shuttle those savings to an emergency savings account, in case the pain persists. 

2. Add in fixed expenses.

In addition to the budget items tracked above, write down all your fixed expenses—from your rent or mortgage to car payments, student debt and your retirement savings. These are the areas where it’s not as easy to make cuts. And on that note, keep funding your retirement account if at all possible, especially if your employer matches any contributions to a 401 (k). While it can feel painful to invest when the markets are unsettled, it’s important to keep a long-term view and remember that historically they have always rebounded, and often with a bounce you don’t want to miss.

3. Determine all sources of income.

Your employment is your most obvious one, assuming you and other contributing family members still have jobs. But also consider other sources of income you might have at the moment, including the recently sent stimulus check, a potential tax refund, and/or unemployment. You also might consider taking out a personal line of credit or increasing your credit card limit at least temporarily if that will help ease some temporary budget strain. 

You might try an online budget calculator to get started. 

4. See if there are ways to plug visible gaps.

No one wants to look at a budget and see there is far more outgo than income, but in an economic time when many budgets have been walloped, that might be the harsh reality. That’s when you’ll want to determine ways to help bridge the difference. This might include calling your creditors to see if you can have forbearance or a payment adjustment. (Just make sure to always understand the repercussions, in terms of when you might need to make up any payments you are missing.)

You also can see if there are ways you can further cut, such as taking a hard look at subscriptions and other expenses that might be adding up over time. 

5. Watch your budget closely.

Create a budget within DataNet online banking to help you keep an eye on your spending. A real-time look at your month to date will help identify places you might need to cut back, such as more cooking at home and less takeout if you see your food expenses start to rise. And it will show where you might be able to make adjustments, such as allocating more to savings if your entertainment expenses stay down given the current quarantine requirements.

6. Determine what habits should stick.

The best reason to make a new budget during this pandemic is because we are essentially being “forced” to stop spending in certain areas with activities not available. That might help you identify ways you can continue to save money even when some semblance of normal life resumes, such as keeping your “Make Your Own Pizza” night on Friday rather than going back to spending $60 at the local bistro. Your online workouts might have been just as effective at a fraction of the cost of a pricey gym. Having your groceries delivered might actually be saving money since you’re less likely to make impulse purchases or have your kids “help” with the decision making. Take the time to project what behaviors you want to stick with that can help you save money in the long run. 

7. Talk to someone if you need help.

Often it can be hard to budget yourself, Valley Strong Credit Union has a number of resources available online if you’d like to devote some of your downtime to learning money-management skills; check out our  BALANCE Financial fitness program and online financial education library. 

While a budget might seem to always be about cutting back or limiting, the more you use one, you’re likely to discover that it is freeing as it lets you spend money in ways that matter to you while still covering all your necessities.