According to the New York Times, in the first six weeks since the outbreak of COVID-19, over 30 million Americans filed for unemployment. What this means in real-life terms is that either you or someone you know has recently lost their job because of the pandemic.
On a personal note, I know a handful of friends and family whose livelihoods have been greatly affected by the outbreak. This is why I want to share some practical things you can do to adjust your budget if you’ve just lost your job or fear this may happen in the coming weeks or months.
Stop auto-contributions to nonessential savings goals
When you’ve just lost your main source of income, your first priority should be to preserve the money you have at all costs. In other words, you need to stop any auto-contributions you’ve set up for any nonessential savings goals to ensure you’ll have enough funds to pay for life’s essentials.
Let’s be real here—it doesn’t make logical sense to continue saving up for a future vacation if it means you won’t be able to afford rent in a few months. There will be plenty of time to switch those auto-contributions back on once you’re earning an income again, but for now, riding out these tough times without getting into debt (or more debt) should be your one and only financial goal.
Reduce on investment contributions
Similarly, if you’re regularly contributing to your investments but are concerned you don’t have enough cash saved up to pay your bills and survive the next several months, consider reducing or hitting pause on your investment contributions.
I know this may feel like a difficult thing to do (seeing as everyone keeps talking about how right now is such a great time to invest because stocks are on sale), but it’s only a good time to invest if you can afford to do so comfortably. You don’t want to find yourself in a situation where you’ve drained your emergency fund and are then forced to liquidate your investments too.
Moreover, this is also a temporary measure. Once things improve and you’re working again, you can restart those contributions and continue investing for the future.
Cut nonessential expenses and do a shopping ban
One silver lining of the current situation we’re all in is that it’s never been easier to do a shopping ban! I’ve heard from so many people recently how they’ve been able to save hundreds of dollars per month just by making all their meals at home and not being able to go shopping anymore.
This is also a great time to start sifting through your past credit card and bank statements to see if you have any unnecessary subscription payments coming up. I’m not telling you to cut your Netflix subscription, because I think we can all agree it’s never been more essential, but maybe you don’t need that next subscription box or a monthly pair of yoga pants mailed to you.
Consider using credit card rewards to avoid getting into debt
Listen, none of us are going on a trip anytime soon, which is something I’m still having a hard time accepting because I’ve never wanted a vacation more in my life!
That being said, if you’re worried about not being able to afford your credit card bill, it might be wise to consider using your credit card rewards to pay off your balance. If you’re still unconvinced, ask yourself this:
What’s more important to you? Being able to pay for a flight with points you’ve saved up, or having a good credit score and not being sent to collections?
Revise your debt repayment plan
This may sound a bit controversial, but right now is not the time to aggressively pay off your debt. There, I said it! And I’ll stand by this view all day long, because if you don’t have any income coming in, once again, your biggest priority should be to preserve the money you have so you don’t get into even more debt.
Therefore, continue making your minimum payments on all of your debts, but any savings you have should be earmarked for more important things like shelter, food, and your overall well-being.
Look at financial relief options for extra help
In case you haven’t heard this before or just need a friendly reminder, I want to tell you that if you lost your job because of the pandemic, it’s not your fault. I’ll say it again so you can really let it soak in. This is not your fault.
Although I’ve shared a few ways you can control your new circumstances as best as you can, there’s still a lot you can’t control. You can’t control when you’ll start working again. You can’t control how long you’ll be out of work. You can’t control when things will go back to normal.
With that said, if you need help, take it. Look into the different financial relief programs available and take advantage of them. If you are eligible for unemployment insurance, apply for it. If you could benefit from a rent pause or reduction, research your options. If you need help making your regular debt payments, talk to a credit counselor for some third-party insight.