Financial well-being January 19, 2023 By
The COVID-19 Pandemic created widespread health and financial implications around the globe. As a result, people lost jobs, were furloughed, laid off, and worked reduced hours. While it can be easy to panic in times like these, we want to share a strategy that will help you think clearer as you begin creating an emergency financial plan during any challenging time.
What's the financial plan? An Emergency Survival Budget! An Emergency Survival Budget is a very basic budget that "only" accounts for your Necessary living essentials. All "Wants & Discretionary Spending" are set aside temporarily. The Emergency Budget will go into effect when your income completely stops or is considerably less than what you usually live on.
First, you will list all your monthly bills and expenses. This will include things like food, rent/mortgage, insurance, cell phone, utilities, debt payments (vehicle loans, recreational loans, personal loans, student loans, credit cards, medical bills, etc.), and medical and prescription needs.
Now, it's time to make some serious choices. This is where you will cut all unnecessary expenses. Remember, this is an emergency survival budget. Here is where you will decide what goes and what stays.
Unsure where to begin making cuts? Here are a few suggestions: subscriptions (Netflix, Hulu, Spotify, iTunes, XM Satellite Radio, Audible, magazines, Amazon Prime, etc.), gym memberships, nail salons, golf memberships, restaurants, entertainment, and cable television. Workouts can be done at home; you can paint your own nails. Anything that would be considered "extra" goes.
Take a deep breath! Count to three or thirty-three, if needed, then release. You can do this! This is only TEMPORARY. Remember, you can exercise at home, access free magazines and books through online libraries, listen to free music online, and remember...you don't need cable.
If you are contributing to an employer-sponsored retirement plan, temporarily reduce your contribution rate, which will put more money back into your take-home pay. When this season changes, make plans to increase your retirement contributions.
Secondly, based on the expenses left (the ones you didn't cut), look for ways to lower costs. I recently read the article "How to Create an Emergency Budget" by Simple Money Mom/financial blogger Marissa Sanders, who inspired me to write this article. She mentions some ideas in her article, plus some suggestions I've added.
Utilities: many companies may offer a "skip a payment" program in times of crisis. If not, see if there are hardship payment plans available. Be sure to ask if they can waive late payments.
Student loans: federal student loans have been temporarily dismissing accrued interest due to the pandemic, but those payments are set to begin in 2023. Unfortunately, dismissing interest has not happened for private student loans. If you have private student loans, call your lender, and ask what they can do for you during this time.
Credit cards: ask your card issuer for hardship assistance because it never hurts to ask. Another option is transferring to a 0% interest card or asking for an increased limit. Be sure to offer to call and speak to your credit card company if you are experiencing a hardship.
Auto loans: if you can refinance to a lower interest rate, do it. Again, make sure it makes sense to you. Watch the fees. If the fees are more than you would save, it's just not worth it. Also, right now could be an excellent time to sell your vehicle and look for an older used vehicle that you can pay for in cash. Not having a car payment can be a real blessing during times of hardship.
Groceries: if the grocery store is in full supply, consider applying coupons, bulk buying, or buying a store brand or generic brand. A few other options include:
- Check with all your hunting and fishing friends/family members to see if they have any poultry, beef, or wild game (pigs, deer, fish, etc.) they would be willing to share. It's always a blessing to share with those in need. Also, if you have neighbors or family members who grow a garden and have canned vegetables, now could be a good time to see if they have anything they could spare.
- Try to use all the food you have stored in your pantry and freezer before buying more groceries. Think of it as spring cleaning for your pantry and refrigerator. Out with the old before bringing in the new.
- Check into federal and state programs for income, food, and utility assistance. Local not-for-profit organizations may also be able to help with food and utility assistance. If you have an emergency savings fund, now is the time to cautiously dip into the fund, knowing that you will replace the funds when times improve.
Lastly, make a point to stay on budget. Overspending when there is no money to spend could signal that you need extra help. Consider reaching out to a financial coach. At First United, free financial coaching is available to our employees, customers, and members in the communities we serve. Feel free to contact us at 800-924-4427, Monday-Friday, from 8 am-5 pm CST.
Remember, our #1 priority is to help you Spend Life Wisely, and we are here to help put your mind and heart at ease.
