COVID-19 Has Made Managing Your Household Expenses Trickier Than Ever — Here's How You Can Stay Safe and Healthy While Sticking to a Budget
April 24, 2020
Budgeting takes discipline. Maybe that’s why it’s is the subject of so many broken New Year’s resolutions. But don’t be tempted to fixate on the sacrifices built into a budget. Focus on the fact that budgeting is a skill. Viewed from this perspective, a budget doesn’t weaken your purchasing power. Instead, it empowers you to spend more wisely.
That wisdom can prove indispensable when unforeseen events impact your finances. The COVID-19 pandemic is a textbook case of what investors like to call a “black swan event” — something so unexpected and disruptive that it puts stress on even the sturdiest infrastructure.
But there is some good news. Although the economy has entered a downturn, it’s not too late to put a smart, resilient spending plan in place for you and your family. Read on to learn how you can retool your household budget to account for COVID-19-related uncertainty.
My Household Has Lost A Source Of Income. How Can I Budget For That?
More than 20 million Americans have lost their job, been furloughed, or had their hours at work reduced due to the coronavirus. If you have to, know that you’re not alone. Moreover, be aware that extra help is available to you via the CARES Act, the $2 trillion COVID-19 relief package passed by Congress at the end of March 2020. Among its many provisions are expanded unemployment benefits.
Anyone filing for unemployment between April 5, 2020, and July 31, 2020, is eligible to receive an extra $600 per week in benefits. Additionally, anyone filing for unemployment is eligible for an additional 13 weeks of benefits. That means many unemployed Texans may receive benefits for up to 39 weeks, or until the end of 2020.
Step one for your budget, then, is to make sure your balance sheet includes all credits to your household accounts.
For more information about the CARES Act and what its provisions mean for anyone taking unemployment benefits, please see our first installment in this content series, “What Do The New COVID-19 Laws And Regulations Mean For Your Personal Finances?”.
Our Household Hasn’t Lost Any Income. Should I Revise My Budget Anyway?
Even if your financial circumstances have not changed as a result of COVID-19, the world around you has. Conditions will continue to evolve as states and cities across the United States experiment with lifting their stay-at-home orders. Your budget should help you prepare for the eventuality of another COVID-19 outbreak — and another round of quarantine-like measures.
Start by reviewing your budget to make sure it is complete, accurate, and itemized. Check your expenses against your monthly bank and credit card statements, taking care to catalog and verify all recurring charges. Your financial flexibility depends on your ability to track exactly where your dollars are going.
How Can I Make A Budget If I Don’t Know How Long The COVID-19 Pandemic Will Last?
Budget for an emergency fund if you haven’t already. Most financial advisors recommend that, even in times of relative economic stability, you have enough cash saved to cover from three to six months of household expenses.
I Don’t Have An Emergency Fund. How Do I Create One?
The key concept here is “liquidity.” That is, make sure your emergency fund is readily accessible and can quickly be converted into cash.
For that reason, most financial advisors recommend opening a dedicated savings account to manage your emergency fund. To maximize your savings, choose a high-yield savings account that pays interest at a rate above the national average.
Should I Start Economizing By Cutting My Big Expenses: My Mortgage, My Car Payments, My Student Loans, Etc.?
If you can continue to cover your major monthly expenses, do so. Consider them to be the foundation of your budget and look for savings elsewhere.
That said, if you find yourself stretched thin, the CARES Act does include forbearance provisions for certain home and student loans.
Specifically, if your mortgage is insured by the federal government — for example, the Federal Housing Administration (FHA), the Department of Veterans Affairs, Fannie Mae, or Freddie Mac — you may be able to defer regular payments for up to 180 days. For more detailed information on these provisions, please see this previous installment in our COVID-19 content series: “What Does the $2 Trillion Government Response To COVID-19 Mean for Homeowners?”.
College graduates who received financial aid from the federal government may be able to suspend their loan repayments through September 30. For more detailed information about this provision of the CARES Act, please see the first installment in this content series, “What Do The New COVID-19 Laws And Regulations Mean For Your Personal Finances?”.
I’d Like To Budget, But My Credit Card Payments Are Getting In The Way. What Should I Do?
Contact your credit card company. Almost all of the major financial firms that issue credit cards have pledged to work with account holders dealing with hardships caused by COVID-19. Relief may be available to you in the form of lowered interest rates, waived late fees, or credit limit increases. Additionally, many of these credit card companies have also created COVID-19 information centers on their websites.
Credit Karma has published a fairly comprehensive survey of the customer assistance being offered by individual credit card issuers. They are also posting frequent updates to this content. Learn more at the Credit Karma website.
Finally, remember that there are advantages to using a cash-back or rewards credit card to make essential purchases. Just be sure to pay your monthly minimum balance and take care not to max out your account. Any proof you can offer that you know how to use credit responsibly will positively impact your credit score.
Should I Keep or Cancel My Subscriptions: My Gym Membership, My Streaming Services, Etc.?
Subscriptions are very easy to “set and forget.” But doing so puts your budget at risk. Now is an opportune time to review all your subscriptions and ask yourself if you really need the services they are providing.
Odds are COVID-19 has forced the closure of your gym, and that you’ve already made other plans to keep physically fit while practicing social distancing. Streaming services such as Netflix, on the other hand, might be more essential to you than ever before, especially if you are sheltering in place with school-age children.
One possible solution for households wanting to economize is to share their subscriptions — and associated charges — with other family members or friends. Many streaming services (Netflix and Hulu, among others) allow you to create multiple profiles and access their content using a variety of devices. For more information on how to share streaming services, see this article from Popular Science.
Finally, when reviewing your subscriptions, observe this rule of thumb: don’t be distracted by monthly fees, even if they are as low as $5 or $10. For budgeting purposes, concentrate instead on annual costs. That figure is a better representation of the savings available to you should you cancel or pause your subscriptions.
What About Future Expenses I May Have Already Budgeted For, Like Tickets To A Big Concert Or A Vacation?
First, inquire about the status of any events you were planning on attending later in the year. They may have been postponed indefinitely or canceled, entitling you to a refund.
The same holds for any travel bookings you may have made prior to the COVID-19 outbreak. No one knows for certain when it will be safe to travel again. Contact the relevant providers (transportation, hospitality, etc.) to learn more about your options.
Although some providers are allowing cancellations, others may only offer credits or vouchers if you have prepaid for their services. In some cases, rescheduling may be your only available option. Also, if you are a frequent flyer or use a travel rewards credit card, be sure to ask how changing your travel plans affects your points balance and/or status in the provider’s customer loyalty program.
Finally, if you’ve signed your children up for summer camps or similar activities that have since been canceled or postponed, inquire about refunds or other ways to recover these expenses.
How Can I Optimize My Food Budget?
Cooking at home is a tried-and-true budget stretcher. Currently, however, doing so is less of a choice and more of a necessity. Here are some tips for planning a satisfying COVID-19 menu while getting the most bang for your supermarket buck.
- Choose your recipes before you make your shopping list.
- Cross off any junk food items on your grocery shopping list. Not only do you typically pay a premium for these items, but they also include few ingredients likely to support good gut health, which provides vital support to your immune system.
- Add shelf-stable items to your grocery shopping list. You can often buy dried beans, rice, pasta, canned and frozen vegetables, etc. in bulk — and at a lower cost per person (or serving). By purchasing items that last longer, you can also avoid making more frequent trips to the supermarket.
- Comparison shop. Now might be the ideal time to try those generic alternatives to your brand-name favorites. Take the time to compare ingredient lists and nutritional information in addition to prices. Food quality still matters.
- Don’t indulge in panic-buying. Doing so leads to overspending, fills your cart with the food you cannot or are unlikely to consume, and can artificially inflate food prices. That inflation doesn’t just affect the shoppers who visit the supermarket after you. It affects you when you return to the supermarket to stock back up on pantry staples.
- Follow the Food and Drug Administration’s (FDA’s) recommendations for safe grocery shopping.
I Need Help Paying For Groceries. How Can I Get Assistance?
The U.S. Department of Agriculture (USDA) is currently issuing “emergency allotments” through its Supplemental Nutrition Assistance Program (SNAP). These allotments are being directed to individual states in which a disaster has officially been declared. Texas is one of those states. In addition to guaranteeing that all current SNAP participants receive their maximum food benefits for April and May 2020, the USDA is directing states to waive some program application requirements, including in-person interviews.
To learn more about SNAP, the program’s eligibility requirements, and how to apply for benefits, visit the Texas Health and Human Services website.
If you have children aged 5 or younger, you may be able to get additional help paying for groceries through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). To learn more about the assistance available through this program, visit the Texas WIC website.
What If I Can’t Even Pay My Utility Bills — Rent, Water, Electric, Gas, Etc.?
The State of Texas offers public assistance both to renters and utility customers experiencing COVID-19-related economic hardship. That includes temporary moratoriums on evictions as well as disconnections of service due to non-payment.
Currently, these moratoriums are set to expire on April 30, 2020, and May 15, 2020, respectively. Tenants living in properties insured by federally backed mortgages may be protected from eviction until August 23, 2020. The National Low Income Housing Coalition has created a free online database (and interactive map) of properties that qualify for this extended moratorium. However, as the Coalition notes, these data sets are not complete, and do not include both “single-family rental homes of one to four units that are also protected under the CARES Act” and “all Fannie Mae and Freddie Mac multifamily mortgages.”
For more information on how Texas is helping tenants, visit the Texas Department of Housing and Community Affairs (THCA) website, or consult this list of resources assembled by the Texas Apartment Association (TAA).
For more information on how Texas is helping utility customers, visit the Public Utility Commission of Texas’ website.
Guaranty Bank & Trust is one of the oldest and most respected community banks in the Lone Star State. We have more than a century of experience helping customers through difficult times. If this is one of those times for you, or if you have questions about getting the most out of the products and services we offer, call our Customer Care Center today at 888-572-9881. As always, we remain committed to growing so we can help you grow.
Are you looking for more information about COVID-19 and your finances? Be sure to check out the previous installments in this content series.
- “What Do The New COVID-19 Laws And Regulations Mean For Your Personal Finances?”
- “How Does The Government’s Response To The COVID-19 Pandemic Help Small Businesses?”
- “What Does the $2 Trillion Government Response To COVID-19 Mean for Homeowners?”
- “What Investors Can Do To Safeguard Their Retirement Savings From COVID-19-Related Market Volatility”