Unfortunately for most communities, the COVID-19 pandemic is far from finished unleashing its wrath against the economy. With a spike in unemployment rates, most live from paycheck to paycheck, having little to nurture by way of savings. As economic uncertainty persists, the need for black financial literacy is more apt than ever before.
If you’re experiencing a financial pinch and need to cut back on expenses, knowing how best to revise your budget can keep your household afloat. Ride out the crisis with these four helpful budgeting tips.
Tip 1 – Take Stock of All the Numbers
When crafting a budget, you’re most likely going to hone in on two figures: your earnings and expenses. If your income has taken a substantial hit, your budget will have to accommodate some drastic changes.
Closely examine your income, inclusive of your benefits. If necessary, you can qualify for a federal stimulus package, especially if you were already living beyond your means to begin with. This package is most available to freelancers and self-employed individuals.
After income, take a closer look at your savings. Ideally, you’ll want to have at least a six-month financial cushion—but you shouldn’t panic if this isn’t the case. Calculate your savings to formulate an expense plan over the coming months.
Tip 2 – Understand Your Expenses
List everything you need to cover every month, beginning with your fixed expenses. These costs might include rent, food, utilities, insurance, and other bills.
Then, calculate your variable payments, such as clothing, recreational purchases, and personal care items. Typically, these amounts will fluctuate within the week or month. Consider what you can do without by categorizing your spending according to priority.
Tip 3 – Know What Counts as Essential
After trimming the fat off your variable expenses, it’s time to scrutinize your essentials. Start with housing—do you own or rent your property? If you own your home, you can receive help for federally-backed mortgages. Most creditors are willing to suspend or reduce loan payments in the meantime.
If necessary, consider refinancing your mortgage. Nowadays, rates are at an all-time low, which you can take advantage of with a remortgage loan. Alternatively, you can consider a home equity loan (HEL) or home equity line of credit (HELOC)—but tread carefully, as your home’s value can fluctuate along with the market.
If renting your home, research whether your state is imposing a temporary moratorium on evictions. Some utility companies are also working to ease the burden of bills by suspending disconnections.
Keep in touch with your credit card issuer to manage debts properly. Some programs will allow for the transient drop in interest rates.
Tip 4 – Shop Smart
Budgeting doesn’t mean you stop spending. Hardly ever is there a case in which cutting spending entirely is possible. Thus, shop smart by taking advantage of vouchers, getting on a cashback program, or doubling up on rewards whenever possible.
If using a credit card, take special care not to overspend. Direct your focus towards sales and purchase necessities in bulk. Not only is bulk-buying cheaper, but it saves multiple trips to the store when you should be at home.
Staying financially afloat takes two steps: coming up with the right budget and taking on a positive and productive mindset. Take things in stride and consider your most available options.
Work with the right African American financial advisors at blackwallet, where we are committed to helping you achieve financial success. With hard work and a willingness to adjust to ever-changing circumstances, building your savings shouldn’t be impossible.