When the COVID-19 pandemic started months ago, I knew that much about daily life would be different, including our family’s spending habits.
So I looked at our household budget and checked where money went each month and noted what was likely to change. As expected, we had greater spending in areas such as food and groceries for home-cooked meals and lessened spending on common things such as gas/transpo and dining out.
And with the way things are changing, now is a smart time to adjust your existing budget or build a new one, or identify savings opportunities. That way, when things get back to normal (hopefully soon), you’ve already set a good financial foundation.
Here are some tips on how to manage your family budget during the coronavirus pandemic.
1. Create a Budget
Our budget is like a road map. We would not know or understand where we’re heading if we don’t have a map.
Creating a budget will help you to see and control your monthly expenses. Putting the family budget on paper, in a tangible way, with all of your income and expenses laid out will provide you with a more conscious and accurate economic perspective during the pandemic.
Use a pen and paper
The simplest way to keep track of the money you have is to grab your pen and a piece of paper or a notebook and jot it down. Keep a running tally. If you receive P20,000 and your partner receives income of P10,000, jot it down and add it on to what is already there, then subtract your expenses from it. Keeping track of your income and expenses gives you an overview of how much you have to work with and gives you back a sense of control.
Use a mobile app
Mobile applications, which already had an indelible place in daily life long before Covid-19 came, are now of even more importance with the convenience and ease-of-use they provide. Mobile apps catered to tracking your expenses and monitoring the current state of your family budget can be of great help.
2. Spend wisely
Be more economically conscious while shopping. Question every expense you make while creating a family budget. It is better to be a bit frugal than to overstretch your resources.
Only buy the essentials
The basic needs of the house and family are of primary importance during such uncertain times. Therefore, basic expenses such as food, rent and bills should be given priority in this critical period. Always make sure you have enough for your basic needs before you go for small luxuries.
Make a shopping list
Always make a list before going shopping. A shopping list you stay loyal to will guide you, stop you from buying unnecessary extras and help you stick to what you need.
One other tip: Don’t go shopping on an empty stomach, as it can make you crave unnecessary things and cloud your judgment.
3. Save a bit
What the Covid-19 pandemic will bring in the coming days remains unknown. When creating a family budget, try to set aside, if possible, a small amount every day. Having some savings will enable you to be prepared for similar situations and emergencies, and overcome them more easily.
How to Budget If You Have Unpredictable Income
Budgeting with irregular income is challenging especially during times of financial uncertainty. But having a budget is important so that you know how much you’re making or how much you have left and where your money is going.
Budgeting will help you focus on prioritizing your most important expenditures and put off spending on anything that you don’t really need right now.
1. Categorize your expenses
When you don’t know how much you’ve got coming in each month, work with what you know — the amount you need to pay each month. Take a look at all of your expenses and categorize them into one of two lists:
- essential expenses or those that you can’t go without; and
- non-essential expenses or those that can wait.
There is no hard and fast rule about which expenses go into which category, but essential expenses typically include your rent or mortgage, electricity, water, food and groceries, cellphone load, internet connection, and transportation. However, a range can still be possible even with essential expenses, so consider scaling back wherever possible to what you truly need.
Non-essential expenses include everything else, and this list has been shortened dramatically by social distancing orders during the pandemic. For instance, hair cuts, shopping for new clothing, and going out with family and friends are all examples of expenses that must wait, which helps our health as well as our wallet.
2. Use Two Budgets
Another way to deal with irregular income is to have two budgets, one for the better months and one for the leaner months. For most people, this is the hardest way to manage their money effectively because it’s easy to get into a spending habit during the better months and then feel deprived during the leaner months.
With two budgets, some people are tempted to spend because they expect to have money again in the better months ahead. They rely on credit to supplement their leaner times, which results in a cycle of debt and spending habits that becomes expensive and difficult to break.
3. Avoid Debt
When you’re not sure when you will resume your former level of income, do what you can to avoid debt or using credit to tide you over. The ensuing debt could make a stressful situation even worse.
Creating a budget and sticking to it will help you manage your irregular income and keep you from falling short and/or relying on credit to make ends meet.
If you receive pay or benefits from different sources, set one of your bank accounts to hold any and all funds you receive during this time. By keeping all of your money in one place, you have a better overview of how much you have to work with.
How to Budget If You Have Lost Your Job
During this time, many of the normal personal finance rules don’t apply. It’s all about financial survival until you can earn income again.
If you’ve lost your job through a furlough or layoff, or you or your household has lost income in the last few months, it’s time to make some adjustments with your budget.
If your income or remaining fund is not enough to meet all of your expenses, you must consider how you can supplement and increase your income on a regular basis or decrease your expenses to make your budget balance.
It’s okay to temporarily suspend contributions for SSS or Pag IBIG Fund. Prioritize your essentials and avoid going into substantial high-interest debt to limit the long-term financial damage.
If you’ve lost all income completely, you need to create a cash flow plan. You can start by figuring out how much you need to cover your monthly expenses. Make a list of all your expenses and cut any that you can live without. Then, call your service providers and lenders to see what sort of options you have to reduce, defer, or cancel your services or payments for the interim.
If you have any non-essential subscriptions, memberships, and services, you may cancel them out to reduce your expenses.
Cut out any nonessential spending and assess how much money you have tucked away in savings or an emergency fund and how much you expect to receive in unemployment benefits, if and when you qualify.
Reexamine your pared-down budget every four to six weeks, or whenever your bills typically arrive. Things changed so quickly in the first months of the Covid-19 crisis and expect them to continue to shift, and adjust your budget accordingly.
If it’s not enough to cover your expenses for the next few months—or until you think you’ll be able to get another job, consider other sources of money such as personal loans, credit cards, and investment withdrawals (stock market, UITF, or Coop savings). Just remember that borrowing money is a last-ditch option.
If you’ve only lost some income or are seeking to adjust your spending to save more during these uncertain times, your budget may look different than it used to. With so much closed during the pandemic, many common expenses are naturally eliminated and it should be easier to put the money you once spent on gym membership, live entertainment or travel directly into savings.
Now more than ever, we need to be extremely diligent with our money by prioritizing the things that matter most. It may make more sense to put more toward our needs and then savings, versus any wants.
Saving money now (if you still can) can help you later, particularly if layoffs are probable in your industry. Every peso you can save now will be helpful later. A tiny emergency fund is a better financial cushion than nothing.