Why now is a good time to re-evaluate your budget
In just a few months we’ve seen our lives and daily routines disrupted in many ways from COVID-19, and for most of us, our spending and budgets have changed, too. But knowing where our money is going and updating our budgets to reflect changes in spending and saving can help keep our financial lives on track — during good times and challenging times.
Create a plan to manage new spending and saving priorities
Regardless of your current financial situation, having a plan can help deal with the stress of living in uncertain times. The steps below can help you take stock of your budget and better manage your finances now and in the future.
Review your current budget and note how your monthly spending habits have changed compared to six months ago. Are you spending more in certain categories like groceries and less in others, like transportation and entertainment?
Assess and update your spending priorities based on your current income and expenses. For instance, if you’re employed but spending less, you may want to allocate extra funds toward saving more or paying down debt. Or, you may want to improve the comforts of home — from updating a home office to creating a home gym or enhancing your landscaping.
Look for ways to cut spending in nonessential categories so you’re better prepared in case of a job loss or pay cut, or in case you’re already experiencing a loss of income. Freeing up more of your income now can make it easier to cover necessary expenses, like housing and food, and help you avoid taking on new credit card debt. Try cutting costs by trimming expenses:
- Cut or scale back on subscriptions, multiple streaming services and outsourced services like lawn care or dry cleaning
- Take stock of the food and household supplies you already have and use them versus stockpiling
- Consider refinancing your mortgage to take advantage of lower interest rates and lower monthly payments
- Review your auto and home insurance policies and make sure you’re not paying for coverage you don’t need
Ask for help if your income has been impacted by COVID-19. Contact your lenders and creditors to discuss financial assistance options if you’re having trouble keeping up with payments like your mortgage, student loans, utilities, car payments or credit card payments. In many cases, you may be able to defer payments, lower your current interest rates or work out a payment plan. Commerce Bank customers can learn more about help and find additional resources here.
Re-evaluate your long- and short-term financial goals. How have temporary lifestyle changes impacted your priorities? For instance, if you’ve embraced more frugal habits like cooking at home and hiking in your own neighborhood, you may not want to go back to your old spending habits. Consider talking to a financial planner who can review your overall financial situation and help you work toward your new long- and short-term financial goals.
Build an emergency fund so you’re better prepared financially to handle the unexpected. If you already have one, consider boosting your emergency savings during an economic downturn to better prepare your household in case of a temporary loss of income. To help grow your emergency fund faster, try transferring money from budget categories you’re not using, like entertainment and transportation, or putting any extra funds, like tax refunds or stimulus checks, into a savings account.
Routinely examining and refocusing your budget can give you a sense of control and put you in a stronger position financially, under any economic conditions. For questions about budgeting or saving, or for additional resources for managing finances during uncertain times, contact us today. We’re here to help.