These carefully curated tips will help you transition smoothly from the old normal to the “new norm” without breaking the bank.
A budget is one of those things your parents always stressed during high school years after landing that first job at the local movie theater or fast food restaurant. It is an essential money management tool that most financial experts recommend implementing into our daily lives. With the recent COVID-19 pandemic hitting many Americans where it hurts, it is a perfect time for millennials to practice responsible money habits. Budgets have been proven to help individuals build emergency funds and create a certain amount of financial flexibility and long-term financial freedom.
As an avid budgeteer, I have put together six tips for creating a COVID-19 personal budget as a millennial to help us get through this crisis in a good financial standing.
- SEPARATE YOUR NEEDS FROM YOUR WANTS
With an extra $1,200 stimulus check from the government (that most likely has been or is being spent by the time I have posted this blog), it can seem like this is a good time to spend on frivolous items. The thing that I tell my clients is “we don’t know when this is going to end”, so choose wisely. Our focus is to stay healthy during this time, so spend your money on the following: healthy foods, housing, medication, and Debt reduction. The majority of us are far removed from the days of spending our disposable income on elaborate brunches and items in our Amazon carts.
By no means am I suggesting we neglect ourselves, but we do need to find a balance during these uncertain times. Are you accustomed to going out to a bar once a week after work? Take this money and stash it in an interest-bearing savings account, for example.
- PUT YOUR MONTHLY GAS BUDGET TO USE
If you are lucky enough to be W.F.H. (working from home) during this pandemic, your spending on gas should be sliced in half. Months without long commutes back and forth to work five days a week can add up to some serious savings! Some of my friends and close colleagues have mentioned that they have only had to fill their tanks up three-five times in the past 60 days; there has got to be something wrong if you’re unable to put money aside with those kinds of cutbacks.
Put this money towards any derogatory marks you may have on your credit report. This will work wonders by increasing your credit score, which serves us in more ways than one. Derogatory marks usually stay on your credit report for 7-10 years.
- EVALUATE YOUR SPENDING HABITS
This can be a hard thing to come to grips with. As millennials, we spend a lot of our hard-earned money on short-term luxuries that usually do not serve us. An effective way to evaluate your spending habits is to do some retrospective budgeting. Analyze your bank statements and credit card statements from the past 90 days or so. This will give you an understanding of where your money is going and how to make strategic shifts in your spending habits moving forward.
Be sure to utilize the financial tools section of your online banking profile, offered by your financial institution for great insights regarding personal spending trends and cash flow. If you do not have a bank account yet, I would highly recommend opening one.
- SMARTER GROCERY RUNS
Quarantining means spending most of your time at home, going back and forth between the couch and the refrigerator. Here are a few tips to help you stay within your budget while shopping for necessities.
- Groceries: To reduce your growing grocery bill, be sure to stock up on shelf-stable foods that do not quickly spoil such as rice and pastas. Pair these with chicken and beef (both can be frozen and stored for long amounts of time) for multiple meals that can serve as dinner throughout the week. Breads and cheeses also freeze well, so be sure to stock up on these items as well. This will help reduce your unnecessary spending on take-out; your pockets will thank you in the long run.
- Medications: If you take prescription meds daily, be sure to give your doctor a call and request a long-term supply of your daily prescriptions. He/she will understand, being that we are amid a pandemic. Also, give your insurance provider a call to confirm that they will cover these extra costs.
- Hygiene products: We all want to stock up at Costco, but some of us may not have the extra income in our budget to make this a reality. Leverage the power of Amazon by purchasing bulks of your favorite deodorant/body wash online. This is usually cheaper than purchasing these same items at your local grocery store and will save you money in the long run.
- Your own home: There are lots of things in your home that have gone unused in the past. Now is the time to read those unfinished books and eat unused canned goods that you have forgotten about. Thinking about making a Redbox run at the local Walgreens? Check that dusty stack of oldie-but-goodie DVD’s before doing so.
- MOVE MONEY AROUND
Some of us millennials have little ones, and babysitter expenses are now adding up now that school has been cancelled around the country. Depending on your situation, the option of dropping the kids off at their grandparents’ home for a few hours of freedom is nonexistent. In this instance, be sure to utilize that stack of money in your emergency fund (that is what the money is for). An emergency fund is a fund for emergencies; you save 10% of each dollar you earn for emergencies like pandemics and/or job loss. If you do not have an emergency fund, you should start one today! You cannot afford not to.
Borrowing money is the last resort because the end goal is financial freedom. Use your credit card wisely, by spending only on things that you can pay off quickly.
- SPREAD THE WEALTH
We all learned in early elementary years that sharing is caring. Get other individuals in your household on board with budgeting if they are not already familiar with the many benefits. My wife introduced me to the power of budgeting three years ago, and it has shifted my finances and the way I think about money.
We hold weekly meetings to discuss topics like finances, entertainment, and travel; all of which are centered around our personal budgets. Get your family in on the fun and let them know that it is time to get serious about your finances in these uncertain times. This will inevitably spark intelligent conversations that can serve all parties for the greater good.
THE BIG PICTURE
Financial literacy during the pandemic is a valuable skill, and it is never too late to start your journey to financial freedom. Tough times do not last, but tough people do. These times shall pass, as we always tend to find a way to recover from seemingly tumultuous times in our lives. I hope these tips will serve you in more ways than one as they have for me, enhancing your life in uncertain times.
If you need help creating a budget for your personal expenses or even for business purposes, feel free to contact Balance Bookkeeping and schedule a free consultation.
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ABOUT THE AUTHOR
Eric Anderson is an Accountant and MBA holder based in Houston. His background includes over 5 years as an accountant, writer, social media marketer, and business professional.