How to Prepare Your Budget for Uncertain Times

The world has changed a lot since March. The coronavirus has paralyzed businesses and even societies, with people staying home as much as possible to help contain the spread of the virus.

Every region responded to the pandemic differently, both in terms of the rate of contraction and the way it affected local business. For many people, the pandemic has been a reminder of how important it is to keep money set aside for a rainy day and understand where your money is going.

Here are a few tips that will help you create a budget for uncertain times.

Reduce Your Expenditures

When you can't be sure what the future holds, it's important to be ready for anything. If you're concerned about potential job loss, you may ease some pressure by reducing your spending now. That way, you'll be better positioned to absorb any potential disturbance down the road, such as reduced hours, a pay cut, or lost clients.

Look at your monthly bills and determine what can be cut. If there are under-used services you subscribe to, cancel them. Don't pay for news you're not reading or video content you're not watching.

Eliminate Your Debt

Sometimes, people need to borrow money to make major purchases. Debt can be healthy, so long as there's a reasonable plan to pay it back.

But being debt-free is a strong way to be prepared for the future. Interest collects quickly, and getting ahead of climbing rates can feel like getting trapped in quicksand if you're not careful. Licensed insolvency trustees are the bankruptcy experts on Vancouver Island that can help you get debt-free using either a consumer proposal or bankruptcy.

If you need help getting out of debt, look for sensitive and experienced professionals who can provide real relief.

Determine Reliable Income

Planning for an uncertain future requires understanding how much stable income you currently have. This includes all your after-tax income and other sources of income you receive every month.

Once you have established how much money you normally make each month, you'll be in a better position to understand your regular outflow of money. From there, you can plan a reduced budget or several different reduced budgets, so that you can be prepared for various levels of potential employment disturbance.

Calculate Fixed Expenses

What costs are impossible to avoid paying? Any contingency planning needs to factor in essential costs.

But perhaps it's possible to make changes that could reduce these costs in the future. For example, you could move to a more affordable home. Things like utilities may be harder to avoid paying, but you can always do things like turning the AC up a few degrees or the heat down to trim your bills.

Track Discretionary Spending

What are you going to do with any money you have left after all your taxes and expenses are paid? Everyone's financial circumstances are unique, and sometimes the situation will dictate what's best. If you have a lot of debt, you're less likely to spend this money on things like clothing or fancy indulgences.

This has already been a year unlike any other. But with a little bit of planning, you can make yourself financially ready for whatever lies ahead.

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