Once the coronavirus pandemic hit, many people began staying at home and spending less money on dining and live entertainment. Screen time, however, has been on the rise since the beginning of the lockdown, which means more internet shopping and sales in streaming services. Now might seem like a difficult moment to focus on your spending habits, but with the extra time at home and the uncertainty of the economy, it is the perfect chance to get control of your finances.
Winnie Sun, financial advisor and founding partner of Sun Group Wealth Partners, provides professional advice on how and why to save money during this time. Whether you have lost your job, got your hours reduced, or just want to cut down on spending, these six tips can help you manage your finances during a pandemic.
#1 Create a budget system that’s right for you
Budgeting is the first step to increase your savings and feel more confident in your finances. It is important that you budget in a visible form so you can truly track your spending. With new technologies, budgeting can be done in many different structures to help individualize your experience. There are traditional methods of budgeting, like spreadsheets or journaling, but there are also mobile budgeting apps that can be used to easily manage your money. After creating a budget, it is important to follow the budget and update it monthly because you will have to make changes based on trips, holidays, and other personal factors. If you feel anxious about all of the factors you can’t control during the pandemic, then budgeting can help you feel accomplished and in charge of your money.
“I think having a budget is always important, but especially during this time with all the uncertainty in the world, it is smart to have a budget and stick to it,” Sun said. “Right now, many people are working from home and can’t do much because of COVID-19, so it’s a great time for them to start managing their money.”
#2 Categorize your fixed and variable expenses
Fixed expenses are those that are the same price every month, like rent, loans, and car insurance. Variable expenses are the costs that change monthly, like groceries, household maintenance, and entertainment. Being able to separate your expenses on your monthly budget will save time and make it easier to understand where you are spending and saving most of your money. Since your fixed variables won’t be changing throughout the year, they can be placed in your budget for every month. Having your fixed variables accounted for ahead of time allows you to focus on your variable costs for the month and how you can cut down on spending. Since you may be spending more time at home than any summer prior, don’t beat yourself up if your electricity or cable bill has increased. Instead, make a note of the changes in your budget and recognize you are living in an unprecedented time, so financial adjustments will be necessary.
#3 Track where you can save extra
If you are looking to save extra money, cut down on your discretionary spending. Instead of focusing on your variable expenses, such as grocery shopping, it is easier to spend less on clothing or shoe shopping. That’s not to say you can’t go online and buy a special outfit or accessory, but it is important that you look at the items you need versus the items you want. Often, the items you want are more expensive than your necessities and can cause you to go over budget for the month. You can also look at your fixed expenses and make changes, like switching to streaming services and getting rid of cable. There are areas in every category where you can save a little extra money, which can come in handy during a pandemic.
#4 Create an emergency fund
“Right now, I think people should be trying to save money in saving accounts, individual retirement accounts (IRA), and emergency funds,” Sun encourages. “It is critical to save and invest the money you have into reliable funds that will benefit your future endeavors.”
Emergency funds are critical to making sure you have enough in your bank account to afford an unexpected cost. During a pandemic, an emergency fund is more important than ever. Having an extra account can help you when you have an unexpected house repair or medical bill. It can also be helpful if you lose your job or get furloughed because you can periodically pull money out of your emergency fund when needed. Remember that your emergency fund is for unexpected and essential costs; it shouldn’t be used for an impulse purchase or vacation. Although it can be hard to look at the money in your emergency account and not spend it, remind yourself how grateful you will be to have it in a time of need.
“I think emergency funds are important for everyone to have, and especially during this time when you could suddenly lose your job or have a sick family member,” said Sun. “You should try to find a way to save at least a little toward that emergency fund, even if it’s just $25 every paycheck.”
#5 Set financial goals
Creating a list of goals can be transformational in every aspect of your life. Specifically, creating financial goals can encourage you to save money and work toward something you have always wanted. With many places temporarily shutting down and reopening because of COVID-19, now is a great time to manage your money and make goals to complete once the world returns to some sense of normalcy. It can also be beneficial to your finances if you create objectives. Financial objectives are specific and measurable, which can help you work toward reaching your broader goals. Whether you want to buy a new car or open up your own business, setting objectives and goals can assist you in laying out the necessary foundation for a successful money management plan. Achieving financial goals may also give you a needed confidence boost in this time of uncertainty.
“People should always have and set financial goals,” states Sun. “As an individual, you should make short-term and long-term goals that you want to reach. After every person in your household creates financial goals, you can come together and use a piece of paper or a whiteboard to list your top five financial goals in order of importance.”
#6 Frequently check your accounts
Checking your bank accounts daily or on a weekly basis is an easy way to stay on track with your budget. Since you may pay for most items with a credit or debit card, it is beneficial to check your bank account frequently. That $2 coffee or tea you buy every day doesn’t seem like a large expense, but by the end of the month, it could cost you over $50. Looking at your checking account can also help you catch any errors that you need to get fixed. By monitoring your account more frequently, you won’t have to check transactions from the past few months to make sure everything matches your purchases. And if you feel powerless during the pandemic, looking at your bank account can provide you with satisfaction and motivation because you’ll get to see the progress you made after following a budget.
“It is really a personal choice to frequently check your bank account because it works well for some people but not others,” said Sun. “Some people experience financial stress and anxiety when they look at their bank account. If you know you are someone that gets anxiety from checking your accounts, there are other ways you can budget your money without having to constantly look at your account.”
It’s easy to get stressed over your finances, and an unpredictable pandemic occurring can be even more strenuous on your bank account. These six tips provide simple yet efficient ways that you can work on managing your money today for a more secure future.
How are you managing your finances during these times? Tag us on Facebook, Twitter, or Instagram at @yhmmagazine and let us know.