Tips for Personal Financial Planning and Monthly Budgeting
If you find yourself among the ranks of suddenly unemployed workers during the coronavirus pandemic, take a deep breath. It’s a time for planning, not panicking.
According to a study by a noted financial education nonprofit organization, 96% of Americans will experience four or more “income shocks” that will result in a decrease of their income by the age of 70. So with smart planning, you can carry forward the personal financial planning lessons learned during this emergency to build a shock-proof financial future.
Monthly budgeting and managing your finances while you’re unemployed can seem overwhelming, but you can overcome that feeling by looking at it as a five-step process.
5 Steps to Managing Your Personal Finances When You're Unemployed
Look at your fixed costs
Identify your fixed costs, generally those bills that come in the mail or through email regularly. For most people, rent or mortgage, auto loans, credit cards, insurance and utilities usually make up the majority of fixed expenses.
Determine if there are ways to lower any of those costs during your period of unemployment
Many mortgage and auto lenders, for example, are currently letting borrowers lower or defer payments during this period of high unemployment. Similarly, some credit card companies are lowering interest rates, reducing required payments or letting customers take a temporary break from payments. Contact your lenders as soon as possible to understand what options are available.
Look at the monthly costs that you can control
Where can you cut back your monthly budget? Reconsider recurring subscriptions, such as streaming entertainment services. Other services, like a gym membership, may even offer an option to temporarily pause services and payments. As municipalities lift “shelter-in-place” orders, you might be tempted to indulge in salon services and meals out. But save those – and save the expense – for the celebration when you return to employment.
Identify sources of cash
You might not be bringing home a regular paycheck, but consider your potential sources of cash. If you haven’t filed for unemployment, you’re leaving money on the table. If you’re in the group receiving a government stimulus check, that’s money in the bank. If you think you’ll be getting a refund when you file your income taxes, then file as soon as possible. In addition, you may have cash saved that you can draw from. If possible, avoid withdrawing money from your 401(k) or another retirement account. Retirement accounts should remain untapped to allow them to grow over time.
Make a monthly plan for paying your bills
If your lenders have agreed to reduced or deferred monthly payments, make sure to pay those bill when due, and make at least the minimum monthly payments on all other bills, if you’re able. If you think you’ll be unable to make a payment, call your lender immediately. It’s better to see if there are other options available than to miss a payment. This final step will help you protect your credit score, which you’ll need to keep strong to get affordable credit in the future.
Above all, financial planning experts agree that you should act quickly, and avoid adding to debt in the meantime. So make a plan now. And plan to succeed.
Looking for more tips on personal financial management or monthly budgeting? Check out more of Comenity’s financial education resources.