This pandemic has affected most if not all households indiscriminately, particularly with our wallets. During a pandemic, often the country’s economy can take a nosedive. When the recession hits, there are ways to stay ahead of the curve, and keep your family from falling on harder times than expected.
Creating your new recession budget
Whether you are starting from scratch or scrapping your pre-pandemic budget, it can seem like a challenge. There are guidelines for any budget, whether you are the head of a large household, or just yourself. Despite a recession, you can still maintain a budget that works- but you’ll need to have motivation and management skills!
To start, you’ll need to:
- Track Your Income and Expenses: This is to get a better understand of your monthly spending versus how much income you receive during the month. If the ratio is uneven, it’s time to start looking at where you can cut back.
- Prioritize Your Fixed Expenses: These expenses are ones that do not change throughout the month. They can be items like your rent or mortgage, and possibly bills like Tampa Title Loans. These should be your first priority, as they are your necessities like living expenses. The state you reside in can affect your interest, especially during a recession. Whether you took out your loan in Tampa or California, be sure it is a priority in your budget!
- Create Your Budget: After sorting out your expenses, you’ll need to prioritize your needs and stick to it. Leave non-necessities out and limit unnecessary spending for more success. Creating a spreadsheet of your planned expenses and compare them to your perceived income. Try limiting your expenses to necessities and analyze your spending habits, so you will not be surprised throughout the month.
- Keep Your Debt in Check: While it can be tempting to rely on credit to get you through a recession, this should only be your last resort. Be sure to manage your debt, and make sure your credit utilization stays down. Keep your loan and credit card payments a priority in your budget as well!
Prepare an emergency fund
During a recession, you might lose your main employment, or your hours might be cut back. You should plan for at least 3 months of your income saved up, but ideally you should have 6. While this can seem like a lot to do at once, you can prepare by dedicating at least 10%-15% of your monthly income to a desired savings account.
Change your spending habits
Once the economy is struggling, it is crucial to start cutting back any way you can. Often, you can find that changing smaller habits in your routine can make all the difference when it comes to saving money! Take your morning routine and lunch routine at work for example. Buying coffee and lunch throughout your work week can cost an upwards of $300 a month, depending on your choice of food. By preparing your lunch and bringing coffee in a thermos to work, that’s around $2,400 you have saved this year! By switching a small habit during the recession, saving hundreds is possible.