Getting through a crisis takes strength. Whether it’s losing a job or coping with the loss of a loved one, you’re dealing with emotional upheaval and a change in your finances.
The best way to cope with financial changes is to develop and stick to a budget. By doing so, you may find steps to take to lower your expenses and prioritize your spending.
The first step to budgeting during a crisis (or anytime, really) is figuring out how much you have coming in each month—and how much you’re spending. During a crisis, you likely have more expenses than income, so it’s time to prioritize.
Focus on highest priorities: A crisis budget should focus on what you need in order to work, stay healthy, and remain sheltered. Housing payments and groceries should be the highest priorities and from there, consider what you need to pay next.
Cut expenses: Consider what you can cut from your expenses to help pay for your highest priorities. If you subscribe to multiple streaming services, choose one or none. If you’re dining out twice per week, what could you save if you went out just once per week? If your electric bill is high, consider adjusting the thermostat by a couple of degrees.
Reduce savings if needed: If you’re setting aside a lot for retirement, consider reducing the amount you save temporarily. But if your employer matches some of your retirement contributions, try to keep saving the matched amount. Meeting your employer’s matched contribution means you are essentially doubling what you save up to their stated percentage. Keep contributing to an emergency fund if you can, but if you can’t, that’s okay. This is an emergency.
Suspend autopay: Take a close look at any bills you have set up to be paid automatically and consider taking them off autopay temporarily. When things are tight, a bill deducted at the wrong time could leave you with overdraft fees. It’s best to manage things manually and pay what you can when you can.
Be realistic: It’s also important to be realistic. You don’t have to deprive yourself of every non-essential purchase. For example, a haircut might seem unnecessary, but if it boosts your confidence, it might be worth the money.
Use credit if you must — carefully: In a crisis, you might be tempted to use credit cards. If you do, make sure it’s for necessities and pay them off as soon as possible. Credit cards can be an excellent tool for managing cash flow, as long as you’re dedicated to using them responsibly. Credit card interest rates tend to be high, and they can take a long time to pay off if you only make minimum payments. During a crisis, though, they can work in situations when you know you’ll have the money, but you don’t have it right now.