With countries currently battling the impacts of the COVID-19 pandemics, individuals and households will definitely be feeling the effects in the short term. Economists are saying this period will go down in history as “one of the worst the world has endured”. The UN Executive Secretary of the Economic Commission for Latin America and the Caribbean warned that the Coronavirus (COVID-19) pandemic will have devastating effects on the global economy that will certainly be more intense than and distinct from those felt during the 2008-2009 global financial crisis.
Since we are here and can’t run away from the effects of the crisis, we need to be prepared. Creating an Emergency budget will be of great importance now more than ever. If you haven’t done so as yet, let’s get to it.
What Is An Emergency Budget? (check out https://www.iheartbudgets.net/covid-19/)
An emergency budget is a budget that you set up when you need to cut out ALL unnecessary expenses in order to survive.
HOW TO CREATE AN EMERGENCY BUDGET.
Here are some general rules to follow when creating your emergency budget:
- HIT “PAUSE” ON YOUR GOALS
If you are currently paying off debt, or saving toward other big purchases, you need to hit the “pause” button on those goals. For debt, simply pay the minimum payments. Don’t use your credit cards unless you absolutely have to.
At this time you need to focus on preserving your cash so it lasts a longer time. It’s better to have cash on hand and delay your goals slightly for peace of mind.
- CONVERT SAVINGS TO EMERGENCY FUNDS
If you currently have savings for things like vacation, Christmas, purchasing a motor vehicle and home repair, we suggest removing those as well. You can live without them while you are in emergency mode.
All the money saved for those things is now part of your Emergency Fund to help get you through the next few months.
- CANCEL (OR PAUSE) YOUR SUBSCRIPTIONS
Cancel any monthly subscriptions that you can live without (we know Netflix will be a stretch but other subscriptions like music that you can get from youtube is not a necessity).
- LOWER YOUR “FIXED” EXPENSES
There are certain things you NEED-the necessities. Namely, food, shelter (and utilities), and transportation. You can’t avoid paying for these, but you can work on lowering them.
For utilities, things like turning off the lights, unplugging unused appliances and devices, stop watering the lawn and washing cars, using less water when showering or washing, can help lower your bills.
This is not only a way to save some money, but is an AWESOME way to help lower your consumption, give the Earth the love she deserves and learn how to live on less (a minimalist lifestyle is the way to go!).
- TALK WITH YOUR BANKER/INVESTMENT ADVISOR
Financial institutions are offering personal loans to help clients with weathering this rough patch. Reach out to them and see if there is any that can suit your situation (and pocket). Ask your banker about delaying loan repayments (if you don’t ask you won’t know, some banks are offering loan holidays). Talk with your financial advisors as well about your investment portfolios. Don’t be quick to sell what you have. In this period re-assess your investment plans and ask for advice on where to invest for the long term.
- REDUCE YOUR FOOD BUDGET
We know this is not easy at all. But if you lost your job or income for a while, you WILL find a way to remove $500 or $5000 (or more) from your food budget, even if you don’t eat quite as healthy while you are dealing with this emergency. Also, cook ah yuh yawd.
- CUT OUT ALL UNNECESSARY SPENDING
Things like Online Shopping, Clothing, Entertainment and Going Out (because, let’s be real, it’s #NetflixAndChill and #Onlinepartying for the next month or two) can go away for a while.
The goal here isn’t to STOP HAVING FUN, but to simply stop spending money to have fun, make sense?
While you’re home, here are some tips on things to do: Read a book, learn a second language, join an online book club (@RebelWomenLit), start a blog, learn a skill (you have the time so make good use of it). Here are some places you can access books and journals or free online courses:
Cambridge University Press- https://www.cambridge.org
Oxford University Press- https://global.oup.com/?cc=jm
Alison University- alison.com