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Managing your budget will help you handle pandemic more effectively

Managing your budget will help you handle pandemic more effectively
By Karan Kapoor

Seeing your income dry up due to work furlough, layoff or loss can be a frightening thing, especially during a global pandemic like coronavirus.

But pressing the panic button is not necessary. Government assistance, including temporary unemployment insurance, bonus grants, student loan forbearance, and mortgage forbearance, may help cover the financial holes. If you are looking for ways or opportunities to grow your money, you do not have to fall back on an emergency fund. These tips will help.

Cut unnecessary expenditures

The first step of making your income work is to determine which expenses are necessary based on your needs, and what you can live without.

For example, necessary living expenses typically fall on three things: housing, utilities, and food. That includes keeping up with rent or mortgage payments, paying electricity, water, or gas bills, and buying essential foodstuffs as part of your budget for bare bones. So bear in mind -you may have some built-in compensation for those costs during the coronavirus pandemic.

Something that goes beyond the necessities of lodging, electricity, and nutritious food will be a fair game to slash your monthly budget expenses, including:

  • Streaming services
  • Gym memberships
  • Newspaper subscriptions
  • Meals (shop bought, ready meals, takeaway)
  • Clothing, accessories
  • Hobbies and recreational activities

Consider cutting overlooked expenses, such as bank fees, too. Switching from a traditional bank to an online bank, for example, could save you money if you can avoid monthly maintenance or minimum balance fees.

For example, bundling car insurance with homeowner insurance or boosting your deductibles could reduce your monthly or annual premiums. Lowering your cell phone or internet service contract will also reduce those prices.

If you have credit card debt, you may apply for a hardship plan on your credit card. Such programmes will lower your annual percentage rate (APR), lower your monthly payments, or encourage you to delay your payments indefinitely.

How to get cash quickly

It helps to find ways to pull in extra money when you are low on cash. Another part of the puzzle is filing for unemployment insurance, but it will take you weeks to start collecting compensation.

Meanwhile, you may consider other ways to improve your profits and cash flow.

  • Reorganising your home and selling unnecessary stuff
  • Join the gig economy as a supermarket or restaurant delivery person
  • Create an online side business, for example, freelancing or tutoring
  • Using devices that give you cashback while shopping
  • Providing facilities locally, such as lawn maintenance or making orders for people who cannot or may not wish to leave their homes

Consider the cost to you if you are considering doing something outside the home to make money. For example, as a delivery person, you are responsible for paying for petrol and liability insurance, not to mention your vehicle's wear and tear. The expenses you will have to pay will be covered by what you might receive.

Savings you never thought of

The COVID-19 crisis may have negative repercussions on your finances, but some silver linings may exist. Take a glance at your budget to see how your expenditure patterns during the stay-at-home orders changed. You could collect a large amount of money if you are not:

  • Eating out
  • Traveling for fun
  • Socialising with friends
  • Commuting to work daily
  • Intuitive buying at supermarkets
  • Intuitive buying at supermarkets
  • Shopping for new things

For example, if you usually spend $200 a month dining out and have all your meals prepared at home for the past two monthsthat is $400 in savings.

Last resort steps

If you have gone out of ideas on how to stretch out your money, there are a couple more things to consider.

You could start a new credit card account, for example, to help you purchase items you need. If you have lost your income, now is not the time to rack up credit card debt if you can avoid it. Another alternative is to dip into your taxable savings account. The CARES Act requires you to borrow up to $100,000 from a 401(k) with no first-year contributions required. Or you can withdraw up to $100,000 from an IRA with no 10 percent early withdrawal penalty. By doing so, you will maximise your potential nesting egg.

Eventually, you can seek to address your financial condition with a credit advisor. A credit advisor can help you develop a workable budget and discuss solutions to manage past due bills or debt payments to minimise your credit score's negative impacts.

Stick with a non-profit financial specialist and be wary of any company that demands an advance fee when providing credit and debt counselling.

Make sure you are taking action

When strapped for cash, especially in a situation like the COVID-19 pandemic, the worst thing you can do is not anything. Sticking one’shead in the sand would make matters harder by avoiding the bills. Alternatively, come up with a plan to handle the debt as far as possible and slash expenses. That will make the financial crisis easier to bear before it goes in.