Creating a Budget During A Crisis

During these challenging times, why even try to tackle a budget? It may sound strange but having a budget contributes to your peace of mind. With so many unknowns, creating a budget can help you feel more grounded and aware of what your financial situation actually is. Essentially when you create a budget you are creating a realistic outline of what the future might be. If your finances are making you anxious, likely the situation is not as dire as what you are conjuring in your panicked mind. Putting things down in writing will help you to take control and help you take the first steps to managing the situation.

Estimate Reasonable Income

Many people start with listing all their expenses. From this, they extrapolate how much money they need. If your income has been affected by COVID-19, this will likely lead to shortness of breath and a racing heart. Not from a virus, but from stress. Take a breath. It is going to be okay. All you need to do is reverse the process. 

Rather than listing all your expenses first, try to think of how much money you reasonably expect to bring in. Depending on your situation, this may be only a fraction of what you previously were making. Don’t be overly optimistic. In most cases, it is best to low ball your expected income in creating your budget. 

Calculate Essential Costs

Now you have a starting point and a goal. Your aim is to limit your expenses so that they do not exceed that reasonable amount of income and hopefully still make a profit.  Review your expenses and make a list of all essential and non-negotiable expenses. These are the fixed costs. Ask yourself, “Would it be possible to stay in business if I do not pay this?” 

If you’re honest with yourself when adding up these kinds of expenses, it is more likely that the sum is well below your reasonable income total. And now that crushing weight you’ve been carrying can begin to feel a bit lighter. You can and will get through this. 

Anticipate Non-essential Costs

 If you have some money left over, you can now turn your attention to negotiable or non-essential costs. These are expenses that make business and your life easier but are not necessarily needed to stay in business. These costs also tend to be variable. When listing what these expenses will be it is important to keep in mind that you can choose how much you spend on these various areas. By exercising some self-control these can likely be reduced greatly from what they were previously. On the other hand, unexpected expenses are bound to happen so leave yourself a cushion.

After taking all these steps, you now have an idea of what your financial future could be. Perhaps the current crisis will not be the financial catastrophe that you imagined. The exercise, while daunting at first, can help you breathe a little easier and be able to get on with the business of taking care of yourself, your family, and your business. 

As always, we are happy to offer you advice and support that can help you to weather this storm. Please contact us and let us know how you are faring and how we can help.