Save and Invest

How to budget the money you have if you lose your job during the COVID-19 pandemic

Man with laptop working at living room
VioletaStoimenova

A growing percentage of Americans are out of work or have had their hours reduced due to the coronavirus pandemic. 

If you fall into that category and are starting to rely on emergency savings to get through this period, you'll want to be smart about how you spend that money. 

Here's how financial advisors recommend you budget the money you have left if you lose your job during the pandemic.

Eliminate any expenses you don't truly need

If you're cash-strapped, the first thing you'll want to do is take a hard look at how you spend your money. 

"The most impactful thing you can do is be ruthless with your discretionary expenses and quickly eliminate everything you can live without right now," Kelly Crane, certified financial planner and CIO of Napa Valley Wealth Management, tells CNBC Make It

Make a list of everything you currently spend money on and circle the items that qualify as "wants." These could be subscriptions, take-out, clothes or electronics. Pause any recurring subscriptions and make an effort to cut back on online shopping.

The most impactful thing you can do is be ruthless with your discretionary expenses and quickly eliminate everything you can live without right now.
Kelly Crane
certified financial planner, CIO of Napa Valley Wealth Management

After slashing those expenses, you should be down to your core budget for the most part. Still, go over your revised list of expenses again, says Crane: "Look for anything else you can live without right now," like your unlimited phone plan, cable, cleaning service or any delivery services. "These are items that might be important in normal life but could go in recessionary times." 

Eliminating these expenses doesn't have to be permanent, but could free up some much-needed cash in the meantime.

From there, you can determine what Crane calls your "bottom-line expense number." That's the leanest version of your typical budget. It should consist of expenses like your rent or mortgage payment, food, insurance and utilities.

Look at how much money you have in your emergency fund or any other savings accounts and divide that by the new monthly expense number you just calculated. That will give you an idea of how many months you can get by without an income.

Prioritize your remaining expenses

If you don't have any money saved up, or project you'll go through your emergency fund quickly, you may have to start prioritizing your needs.

Food and housing should be your top priorities. If you're worried about making your housing payments because of the pandemic, start by contacting your lender if you're a homeowner and your landlord if you're a renter to discuss payment options. 

"Federal regulators are ordering lenders to offer homeowners flexibility," Andrew Westlin, a certified financial planner at Betterment, tells CNBC Make It. "These changes are expected to be offered by private lenders, too. Under this policy, payments can be reduced or suspended for up to 12 months."

When it comes to your food budget, stick to the essentials. You can also follow this guide on what not to waste money on, including foods you normally don't eat.

After prioritizing food and housing, you'll want to figure out the smartest way to tackle your other bills. Again, start with a phone call: Contact your utility company, internet provider and/or cell phone provider and ask if they'd be willing to waive late fees or can provide a payment plan with low interest. It can't hurt to ask.

If one refuses to be flexible, consider paying that bill first so you won't owe late fees or rack up interest over time.

Make minimum debt payments if you can

If you can afford to pay the minimum on your credit card balance, do it. If you don't, you may owe fees and extra interest, and your credit score could be negatively impacted.

If you absolutely cannot make payments at this time, contact your card issuer right away, says Westlin. "There is no universal relief program, but several major card issuers are offering some relief to cardholders," he says. You could also consider a balance transfer, he says, which allows you to move your credit card balance from a high-interest card to one that charges you no interest during a 0% introductory period.

It sounds simple, but reaching out to your various providers — mortgage lenders, student loan providers or credit card companies — to review your options is essential. "You won't know what's available if you don't ask," Westlin says.

For more resources, check out:

Don't miss: Financial planner: Here's when you should temporarily stop saving for retirement during the pandemic

Check out: The best credit cards of 2020 could earn you over $1,000 in 5 years

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