How To Reframe Your Budget Right Now

This past week, She Spends hosted our first Zoom happy hour. During it, I gave a brief presentation that covered how to make money decisions during a pandemic and economic downturn. Not everyone could attend that event, so I have uploaded the presentation here. I’ve also summarized what we covered below. 

Identify Wants & Needs
The first step in creating any budget is figuring out what you want — and need — to spend money on. 

Start by considering your absolute musts: housing, food, and utilities. For some people, this may include medication, therapy appointments, or grocery delivery. Keep in mind here: everyone’s baseline needs are a little bit different. 

Use this step to determine what you want to be spending money on, too. This applies to the immediate term (think: supporting a small business or nonprofit) as well as the short and long term. Feel free to dream a little bit. We will root these goals in reality later on. 

When making short-term money goals, think about what you want to spend and save in the next year. For many right now, short term goal-setting amounts to having money in an emergency fund and keeping a steady income stream. 

Longer-term goals may include paying down debt, homeownership, a wedding, having children, or donating a certain portion of your income. Think: what do I want to do in the next three, five, or ten years? 

Time Travel 
Next, take a look at what you were doing with money in January and February when things were “normal.” 

Here’s how to do it: 

• Use a tool like Mint, You Need A Budget, or a traditional spreadsheet to categorize your spending. 

• Locate your debt, from credit cards to student loans. Write down the interest rates and fees for each. 

• Likewise, check to see if you have any outstanding bills, medical or otherwise. Note the balances.

• Find your “hidden money.” Do you have an HSA, FSA, commuter benefit or retirement savings account you forgot about? What about tax returns, pending payments, gift cards, or credit card points?

If you find that you’re struggling to complete this step, check out our guide to handling money avoidance for some pointers. 

Pause, Now Process
For some, looking back at spending and saving can be extremely emotional. This is so normal! 

Keep in mind that nobody predicted that 2020 would turn out the way it has. Big banks and private equity firms are struggling to pay rent and employees, so they’re asking for help from the government to do it. If these mightily-resourced companies are struggling, it’s no wonder that ordinary people are too. 

Practice radical acceptance. You may be having thoughts like: “I’m so bad at money,” or “I am a failure for not saving more.” Instead, reframe these thoughts: identify the emotions you’re feeling, why you’re experiencing them, and what you could do to cope moving forward. 

Try something like: “I did my best at saving what I could. I don’t feel like it’s enough, so I’m feeling shame and guilt about it. It’s okay to feel these feelings. Moving forward, I want to save more, which I will do by auto-transferring $20 a week to my savings account.”

Reality Check
Money has totally changed in the past two months. Many of our personal financial situations have changed, and the federal government rolled out a relief package that aims to help. 

A brief list of what has changed for most of us: 

• Many of us have — or will — receive $1200 checks from the federal government. 

• Unemployment insurance has been expanded to include gig, freelance, and part-time workers. 

• You can now withdraw up to $100,000 from your retirement savings account without incurring a penalty in certain circumstances. More here. 

• Federal student loan interest has been put on pause. 

• You can now use HSA and FSA money for over-the-counter drugs and menstrual products.

• The stock market crashed, then rebounded (somewhat!). 

• Employment, salary and investment outlooks are gloomy.

A brief list of what may have changed for you: 

• Health of you, your friends, and family

• Employment status

• Long term professional trajectory

• Spending (more on groceries, less on nights out, amiright?)

• Debt levels

Build Your Priority Pyramid
Using the facts that apply to you, draw something like this:

Personalize it to fit the wants and needs you identified in step one, factoring in your unique reality. 

New Budget, Who Dis? 
You have all the facts. It’s time to put them to work. Take a look at our income and spending, and consider what already has changed, as well as what still can. 

Some ideas for finding wiggle room in your budget:

• Check with your private student loan provider. They may be able to reduce interest rates, especially if you let them know that your financial situation has changed due to coronavirus. 

• Same goes for utilities and other debts. Give your providers a call. Ask for an extension, fee waiver, or interest rate reduction. Be persistent: sometimes it takes more than one ask to get what you need. 

• Use credit card points, gift cards, and your HSA/FSA as spending money. 

• Stop paying your federal student loans while the interest has been paused. 

• Stop contributing to retirement savings. Tap your retirement fund if you need to.

• Pause or cancel your gym membership and subscription services you no longer use.

Once you have a little wiggle room, use your priority pyramid to guide you. Pay your rent! Fund your emergency savings account! Pay down that debt!

Remember through all of this that personal finance is personal. We all start from different places with money, so our journeys will look different. Whether you use an app, spreadsheet, or pen and paper to create a plan, what matters is that you’re getting in touch with your financial situation and offering yourself some grace as you go.