There was a time when the pandemic COVID19 spread like wildfire. Since the government had no idea of ways to contain the virus, lockdown seemed to be the best decision taken in favour of people.
Though it was impossible to prevent the virus from taking the lives of people, it could prevent the situation from going out of control. However, the worst impact of the lockdown was it decimated the economy.
You had to stop working, and you were dipping into your savings to meet your regular expenses. Some of the people could continue work from home, but they had to work on half-pay. Well, two months are over, and now the lockdown is being gradually lifted.
You all need to get back to the routine activity. Since your financial condition is no longer the same as it was before the lockdown, you will have to reassess your budget.
Continue with temporary savings
As you have spent months at home, you have developed habits of living frugally. You did your hair instead of going to the salon, and you prepared your meal instead of ordering it from a restaurant.
You have faced these temporary changes. Try them to work in the long run. As takeaways and home delivery facilities are open and soon you will be able to go to entertainment clubs, it does not mean you will be free mind to fritter away money.
If you stick to your new habits, you will be able to save some money to help you tide over during financial hardships.
Though you have started going back to your work, it will take some time to have money streaming in as it was before the lockdown.
Make sure that you get rid of your prodigal nature and reframe your budget according to your current financial situation. Lockdown period has taught you that you can make do with available things, and hence you should continue to spend less money even business picks up the spirit.
Re-evaluate your debt repayment plan
During the lockdown period, you would have got a moratorium period from your lender. Thankfully, you did not have the burden of paying off your debt when money was not coming in, but it was not an opportunity to have your debt written off.
Once the moratorium period expires, you will have to start making repayments, but they will be slightly higher this time due to accruing nature of interest.
Now is the time you should plan your repayments. A good rule of thumb says that you should prioritise debts with high-interest rates. For instance, mortgage payments should be prioritised to quick loans in Ireland.
Do not give up on an emergency cushion
You must have understood by now how important it is to maintain the emergency cushion. You must have felt that €1,000 would be enough in case any emergency pops up, but now you will be regretting why you could not have saved more. Savings and emergency cushion are two different things.
Savings will help you achieve long-term goals like building retirement funds and saving for a deposit size for your home. An emergency cushion, the other hand, will help you meet unexpected expenses, for instance, you may have a medical emergency, your car may need a repair etc.
At the time of reassessing your budget, you should try to have enough room for building an emergency cushion. Try to set aside at least 20% of your monthly income to the emergency savings account. It will not be hard to do so if you cut down your spending.
Automate your savings so that money goes directly to the account as you get your paycheque. Another benefit of the automation is it reaches the right place before you get any chance to spend it. Do not dip into these funds unless there is no emergency.
As your financial condition is not as stable as it was before, you will have to figure out ways to adjust your budget to avoid running out of money. No matter how much you are earning, it would be best if you do not stop setting aside money. If you are not left with some cash after meeting recurring expenses, you should increase your income sources.
Description: To revamp your budget after spending two months home, stick to your savings, build an emergency cushion and prioritise debt repayments.