Disruptions to Your Income
A reduction in your income or a complete disruption from unemployment or a job furlough always feels uncomfortable, but there are ways to manage through the rough patch. Many families are navigating a change to their income as the world faces unprecedented times.
Periods of economic volatility can impact your regular income and especially your portfolio income, leaving your everyday budget vulnerable. Now is the time to get your finances organized and create a budget that works for you today and tomorrow.
There are a few simple things you can do to get started:
Identify and quantify your income and expenses
Before you can create your budget, you need to know what you have to work with. Think of this step as a simple equation. Add up your income and then subtract your expenses.
Translating your life into a list of income and expenses (pluses and minuses) may seem overwhelming at first, but it’s well worth it. Add your different sources of income together and then subtract each expense starting with the big ones first. Here is a quick and simple form to get you started:
Download Spending Plan Worksheets - Pick Your Favorite
If your expenses are more than your income or just too high for your expectations, it's time to make adjustments. To lower your expenses, you could consider:
- Apply for any federal, state or local financial relief that you might be eligible for as it becomes available
- Consider refinancing debt or mortgage loans to a lower interest rate
- Make more meals at home rather than ordering takeout
- Try a DIY approach instead of paying others to fix things around the house. Start with YouTube to help guide your projects.
- Save as you shop with coupons and special offers; comparison shop for both brands and quantities
- Set monetary limits for yourself on coffee, snacks, energy drinks, alcohol and other items for each week
- Save on energy bills by turning off lights and appliances when not in use; watch the thermostat and adjust slowly to lower the energy use to cool/heat your home
As your Spending Plan gets in line with your income you can build up your emergency fund. This will give you greater financial stability and strength in your household expenses.
Look back at the difference between your expenses and your income. If you find yourself with extra money at the end of each month, it’s money you can put toward your goals like your emergency fund. Even if the amount seems small now, it could make a big difference in the long run.
Tip: To make saving for your financial goals even easier, try setting up automatic payments for savings accounts. For example, if your goal is to add to your emergency fund, you may be able to set up a direct deposit from your paycheck to this account.
Create your Spending Plan—and make it happen!
Building a monthly Spending Plan is simply the first step. It may take some getting used to, but once you’ve been following your budget for a few months, you’ll start seeing the benefits. And if it doesn’t seem to be working, you can always adjust as needed.
Budgeting can pay off in normal times, but it is critical in times of financial uncertainty. A good budget will help you meet your everyday expenses, discover new ways to save money and stay the course for your long-term financial goals. This will drive your financial success and allow you to deliver on your financial commitments.