This article was written and originally posted by The Financial Diet in partnership with M&T Bank.

In such uncertain times, thinking about money is often the last thing you want to do.

By The Financial Diet

April 21, 2020

In such uncertain times, thinking about money is often the last thing you want to do. We totally get it — avoiding difficult topics is a coping mechanism, and it doesn’t mean you’re a bad person. The spread of COVID-19 is affecting all of us, especially those of us who don’t have the privilege of good health or gainful employment. But sometimes, the best thing you can do for your long-term wellbeing is to face a problem head-on. That’s why we’re partnering with The Financial Diet  to bring you actually-useful money advice during a period of anxiety. 

If you’re struggling to stick to your budget right now, remind yourself that your circumstances may very well be out of your control. Forgive yourself for not preparing as well as you “should” have, and take some proactive steps to get back on your feet. Here are some questions to ask yourself if you need to rethink your budget, temporarily or otherwise:

What is the bare minimum I need to get by each month?

The first thing you should do is come up with a bare-bones budget for a typical month. This amount will cover only necessary spending, nothing “extra.” Your list of necessary expenses will look something like this:

  • Rent or mortgage
  • Transportation costs (either gas/car payment/insurance or public transportation costs)
  • Debt payments
  • Groceries
  • Electricity + other utilities
  • Internet
  • Prescriptions + other medical expenses

You may have other necessary costs based on your personal circumstances, such as your child’s daycare or tuition, or caretaking costs for elderly relatives.

2. Do I have enough in the bank to cover my expenses for a few months of income loss?

Next, you need to seriously evaluate whether you can actually cover those necessary expenses currently with all of your liquid accounts. First, determine how much is in your checking account right this minute. How long would that cover your basic needs? Next, evaluate your savings account(s). If at some point you find yourself out of work, with reduced income, or with unexpectedly high expenses for any reason, you may need to dip into savings. How much do you have set aside? And how much would you feel comfortable taking out in the event of an emergency? If you don’t have enough to cover your basic needs, you may need to tap into other resources (which we’ll get to later). But if you do have more than you need right now, one of the best things you can do to give yourself future financial security is to leave enough cash in a savings account to cover a few months’ worth of expenses. Many experts recommend saving 3-6 month’s worth of expenses, but any amount is better than none, and continuing to build that reserve little-by-little is a key part of any financial plan.

3. Are there non-essential recurring items on my credit or debit card that I could cancel right now?

Of course, the money you have set aside to cover your necessary expenses may be accidentally applied to non-essential purchases if you’re not careful. Do you have any recurring expenses on your debit or credit card that you could either cancel or temporarily pause? Here are some potential examples:

  • Gym membership
  • Subscription delivery services, like Blue Apron or FabFitFun
  • Streaming services
  • Newspaper & magazine subscriptions
  • Movie theater memberships & other entertainment subscriptions 

You may feel like these things are necessities, but remember the “endowment effect”: feeling a sense of ownership over something and that you can’t go without it, simply because you currently have it. Food is a necessity, but your Blue Apron subscription isn’t. Once you’ve identified your unnecessary recurring expenses, you can cut down your spending by either canceling them or temporarily suspending service. It may take a few awkward phone calls or customer support chats, but your budget will thank you. Plus, you can use this as an opportunity to evaluate what’s really important to you when your income is back on track: did you actually use that streaming service, or were you simply used to having it? Going without it for a few months will provide some serious clarity.

4. Are there some purchases I could simply postpone without having to do away with them forever?

You may have to put a pause on something like planning a major vacation, but that doesn’t mean you can’t continue the dreaming and scheming — creating hypothetical itineraries and researching restaurants and activities. You can enjoy the psychological benefits of planning a vacation while holding off on making any actual bookings until you’re back on your feet. 

As for trips that you already had booked, be sure to take advantage of every accommodation being offered through the vendor or your travel insurance. It’s always worth trying to get in touch directly with a customer service rep, AirBnB host, or vendor to see what your options are rather than just assuming you’ll only get what’s listed on their official policy. Lastly, a hot tip for getting in touch with airlines: try Twitter! Delta, at least, is highly responsive via DM.

5. Do I know how to cook myself at least a few different meals that I genuinely look forward to eating, and is my pantry stocked with basic essentials that will enable me to make these regularly?

You don’t have to be anywhere near professional-chef-level to be able to cook well for yourself. It’s one of the most budget-friendly habits you can adopt, especially if you can make meals that simply rely on non-perishable pantry staples and frozen or canned goods. Because if you know how to cook for yourself on a shoestring, you can basically eliminate any restaurant/takeout spending from your budget — at least temporarily

6. Am I paying higher premiums than I need to be? 

For instance, maybe you have a credit card that has excellent rewards — but if the annual fee runs you hundreds of dollars a year, it might be costing you more than it’s worth. If that’s the case, call your credit card issuer to see if you can downgrade to a no-fee credit card option.

You may also be paying a hefty premium for your car insurance policy, even if you’re driving much less than usual. It’s worth it to call your insurance provider to see if they have options for lowering your monthly payment, at least temporarily.

Additionally, contact any debt collectors — your credit card company, student loan financier, etc. — and ask about their hardship programs. They may be able to lower your monthly debt burden as well as the interest you pay over time. You can also check to see if your internet/utility providers are pausing any kind of service suspensions (and some are even offering their services for free temporarily). That way, you know what bills you can hold off on paying if absolutely necessary.

7. Are there any resources I could tap into that I haven’t considered yet?

You may have more helpful options available to you than you may think — sometimes, you just have to know where to look.

For one thing, there is absolutely no shame in filing for unemployment. Of course, it may take some time for your query to be processed if there are many others in the same boat, so the sooner you get started with the process, the better. Here’s an overview of filing for unemployment benefits

If you’re a small business owner, there may be low-interest SBA loans or other government programs available depending on your circumstances. Here’s a list of coronavirus-specific aid for small businesses. And if you have kids, check to see if their school district is offering free meals — here in NYC, kids can get three free meals a day at any of the predetermined 400 department of education sites. 

8. Are there additional emergency plans I could utilize if all else fails?

There are always additional options to consider based on your specific scenario. While we’d never advise you to take on unnecessary debt, sometimes it’s the only option. It is important to note, that if you have lost your income then acquiring or applying for new debt may not be possible at this time. If you have leveraged all of your emergency savings, looking at credit options may be your next best option.

With rates being at all-time lows, there are some smart credit decisions that you can look into. Start by talking to your bank representative on the options that would work best for you. 

First, if you have a good credit score, you may be able to qualify for a credit card with a 0% APR introductory period for up to 18 months. (Some of them even allow you to transfer outstanding credit card balances onto the card for a small fee). That means that you won’t have to pay interest on any purchases you make on the card until the introductory period is over. But that also means you need to focus on paying off the card as much as humanly possible before that rate period is over.

Secondly, if you do currently own a home and have equity available in that property then a Home Equity Line of Credit is something worth exploring. This generally will have a low interest rate attached to it and a longer payback period, allowing you to manage lower minimum payments at a low interest rate.

Finally, there are additional personal loans or lines of credit that you may qualify for that are offered by your bank. Therefore, it is important to leverage a trusted professional to help guide your decision-making process. If you’re in severe debt and have exhausted all other options, you may qualify to file for bankruptcy. Just remember that it’s a major decision that will affect your credit for years. Do plenty of research before taking any sort of action.

In speaking with our partners at M&T Bank, here are some of our best tips to use when rethinking your budget:

  • Leverage an online Budget Tool, such as Money Smart* to help identify where your spend is going on a monthly basis, and help create a plan around the categories most important to you.
  • Pay yourself first – always set aside what you can for emergency savings and retirement out of your paycheck on a regular basis. You should be able to determine the amount that you are able to contribute towards your savings by leveraging your budgeting tool.
  • Have a goal to have 3 – 6 months of living expenses in a liquid savings account.
  • When you leverage credit, always have a plan around how you will pay this back within the required timeframe.  
  • At a minimum, conduct a financial review every year with your bank advisor – use this to review any credit payments you are making and opportunities for refinance, review your automatic payments that you have set up in your account and ensure that you are set up with the newest digital solutions to help manage your accounts on a daily basis.

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To learn more about how M&T can help you reach your savings goals, visit a branch near you.

© 2020 M&T Bank. Member FDIC.

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Disclosures: 

This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.

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