For many, COVID-19 and the resulting economic uncertainty have disrupted even the best laid financial plans. While it will likely still be some time before we know what the post-pandemic world will look like, you may be asking yourself how you should adjust your budget. Below are four tips for updating your financial plan:
Take Stock Of Where You Are Financially
Virtually all consumers’ financial circumstances have changed, from income fluctuations due to employment shifts to alterations in spending and consuming habits. The first step in adjusting your budget is to take stock of where you are, from what is in your bank accounts to how changes are affecting your finances. Identify where you have money coming into your budget, either from a paycheck, unemployment benefits, or other rebates/adjustments.
Make a list of your expenses and categorize them into essential spending and discretionary spending. Essential spending encompasses the “musts” in your budget, including expenses like housing (either your mortgage or rent), utilities, health care and food. Discretionary spending includes the “nice-to-haves” like streaming services, gym memberships, and non-essential online shopping purchases.
If you had previously completed this exercise, take a look at how much money is allocated to these expenses. Your daily coffee fix in the office may have changed now that you work from home, or you may find that you are ordering more takeout to support local restaurants.
Once you have a list, compare the amount of money going out for these expenses and the income you have coming in. If your expenses are higher than what is coming in, consider reducing discretionary spending. Even if your expenses are lower than your income, now may also be a good time to reduce expenses so you can save more money every month in the event your income changes in the future.
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Reflect on Your Financial Goals
Before COVID-19, you may have been saving for a down payment on your first house, planning on taking a well-deserved vacation, working toward paying down debt, or reaching another financial milestone. The current uncertainty might change these financial priorities for you, requiring that funds go to necessary expenses and bills.
Your financial journey is not a race and goals are not set in stone. In an unprecedented situation like this, it is perfectly fine to adjust your goals and timeline for achieving them.
Learn More About Options For Saving For Retirement
As your income changes, it can be easy to reduce retirement contributions or even borrow retirement funds. If possible, resist the temptation especially if you are on the younger side. While you can catch up on retirement savings, it’s important to start early when saving for your future.
It’s important to remember that you are not alone. If you have questions about what your budget or financial plans should look like, our bankers are still here to assist you.
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