Adapting to COVID-19 hasn’t been easy and for many of us that is particularly true when it comes to managing our finances. Many of us have either had to deal with a gross reduction in salary or have had the misfortune of losing a job altogether.
Alas, because human nature is to be innovative, we find new ways to adapt and survive.
So how do we begin to do this? By understanding that change is constant and for better or for worse we must always be prepared for sudden events. Here are some pointers:
1. Accept your changed situation
The sooner you accept the reality of your situation and begin adjusting, the better you and your family will be able to cope. Even though you will have less money than before, you can learn to adapt to your new financial circumstances. Learn about government or humanitarian assistance that may now be available to you. Act quickly, since such programmes often give candidates a limited time to apply for aid.
2. Work together as a family
Discuss the situation with your spouse and children. With good communication, you can help everyone in the family understand and support changes that might be needed. And when everyone works together to be frugal and avoid wastefulness, your funds will go further.
3. Create a budget
When you are forced to live on less, it is more important than ever to know where all your money goes. Create a budget by first listing your expected monthly income based on your new situation. Next, itemize your current monthly expenses and spending habits, even though you know these must change. Try to include in your monthly expenses a set amount of money that you want to save for unexpected expenses or emergencies.
Tip: When tracking your expenses, do not forget to include smaller purchases. You may be surprised at how much these add up over time.
4. Prioritize your expenses and make changes
Compare your income with your expenses, and identify what you can eliminate or reduce so that you can keep within your reduced income. Examine the following areas:
Transportation: If you own more than one vehicle, could you sell one? If you own a luxury model, could you switch to a more economical one? Could you use public transportation or a bicycle and do without a vehicle altogether?
Entertainment: Can you cancel, at least for a time, paid subscriptions to streaming, satellite, or cable TV services? Can you find lower-cost alternatives? For example, your local library may lend movies, e-books, and audiobooks without charge.
Utilities: Discuss, as a family, how to reduce water, electricity, and fuel costs. Turning off lights and taking shorter showers may seem insignificant, but such habits can help save money.
Food: Avoid eating out at restaurants. Instead, cook meals at home. Plan your meals, buy and cook in bulk when possible, and reuse leftovers. Make a list before you go shopping to avoid making impulse purchases. Shop for fresh foods that are in season, which are usually less expensive. Avoid purchasing junk food. Consider planting a vegetable garden.
Clothing: Purchase items only when you need to replace those that are worn out, not to stay in fashion. Look for end-of-season sales or items in good condition in thrift or secondhand stores. Line-dry clothing if the weather and your circumstances permit; this will save the utility costs of using the clothes dryer.
Future Purchases: Before you buy something, ask yourself: ‘Can I afford it? Do I really need it?’ Can you delay upgrading or replacing appliances, electronic devices, or vehicles? On the other hand, can you sell items that you no longer use or need? Doing so can help you simplify and add to your income.
Tip: When your income is abruptly reduced, you may find added incentive to quit habits that are harmful and expensive, such as tobacco use, gambling, or alcohol abuse. Making such adjustments will not only help your finances but also improve the quality of your life.
Alicia Roopnaraine is a Psychologist. You can send questions or comments to her at aliciaroopnaraine@gmail.com
