The pandemic has made self-isolation a standard norm these days. People are keeping to their homes as much as possible and only going out for important things like groceries or exercising. If you’ve been working from home, it’s a good time to start looking at your finances and considering how you should be saving money as it’s unclear how long this health crisis will remain. And if you’re re-evaluating your budget to free up some cash, here are some tips to start you off.
Eliminate the Unnecessary
Make a list of your current expenses and circle the ones you regard as “wants.” These could be subscriptions, clothes, electronics, etc. Pause subscriptions or if you want to be ruthless, cancel them. And stop paying for anything you can live without for the time being. You’ll end up with a core of your expenses, which could be something like your mortgage payments, rent, utility bills, food, and insurance.
Pay Your Credit Card Debts
There are three methods you can consider to pay down debt and decide which one will work for you best:
- Snowball – Make minimum payments on all debts. Then, spend the rest of your available money to pay off the smallest balance first. Continue with smaller balances until you reach the big one, regardless of the interest rate. Research has seen the success of this but not without its drawbacks, such as incurring more interest charges.
- Avalanche – Settle minimum payments on all debts. Then, use the rest of your available money to pay off the debt with the highest interest rate. This is followed by the second-highest, and the third-highest, etc. This often results in lower payments over time.
- Blizzard – Created by credit card expert Beverly Harzog, this method uses the Snowball method to start clearing away the smallest debt balances. Once that’s cleared, it’s followed up with the Avalanche method by working your way from the debt with the highest interest rate to the next highest and so on. The Blizzard method takes advantage of the momentum and psychological motivation you get from having cleared the first debt.
Refinance Your Mortgage
Mortgage rates have fallen in the last few months, so if you’re a homeowner, you’ll likely get a better deal now than before if you refinance and recalculate your home mortgage. It may be a good time to shop around for lower rates to reduce your premiums. But make sure the lower interest rate is enough to offset the closing costs.
Talk to Your Landlord
If you’re a renter, you may want to talk to your landlord about delayed or partial payment options as a temporary measure. Some landlords are willing to listen and assist where they can, especially to a good tenant going through hardship during the pandemic.
Savings at Home
Cook your own meals for the week. That way, you can plan on what to get at the grocery and stop ordering takeout. Learn to grow herbs, as they can last for months. Don’t buy bottled water; get a filter instead, and save the environment in the process. Make your own coffee as well. If you have wilted vegetables, don’t throw them in the trash. Put them in the freezer and make yourself a smoothie the next day. Or find a recipe online for a veggie stock that’ll use those vegetables.
You can also save money by cutting your electricity bills. Here are some tips:
- Keep your freezer full as it uses less energy if more contents are already cold.
- Use your dishwasher when it’s fully packed. The same goes for your laundry. Doing a full load each time reduces energy and detergent use. Also, forget the dryer, and hang-dry your clothes. If possible, wash with cold water as often as you can.
- Lower the temperature of your water heater as much as you can bear.
- Change the filters in your air-conditioning and heating units to keep them working at optimum levels.
- Switch to LED energy-efficient light bulbs.
Create an Emergency Fund
This is a safety net that involves building up to three to six months’ worth of living expenses into an emergency fund that you can access when there’s a future loss of a job or an urgent car repair, or the like. You can start small and raise it to a higher amount when you can.
The most important tip of all is to stop spending for the time being. As there are a few entertainment facilities open, it shouldn’t be difficult. Stick to your budget and only spend on priority expenses like food, utilities, and the roof over your head.
Planning and looking out for your financial security is challenging during the pandemic. But it can also be rewarding in the long run if you set your financial goal at a reasonable level for your situation. Being flexible and keeping track of your expenses while adapting to changes in your spending habits can keep you afloat for a long while and may give you a bonus of extra cash to spend when the health crisis is over.