Money Management in Times of Crisis

Pensive focused young working on company budget, crumpled paper balls scattered all over her desk

The COVID-19 pandemic has been a harsh reminder that a crisis can strike at any time. Although this ongoing global calamity will eventually become a part of history, it won’t be the last crisis we experience (individually or collectively). That’s why, just as you protect your health by getting a vaccine and wearing a mask, it is important to protect your financial security by learning how to best manage your money throughout a crisis situation.

These personal finance rules apply to everyone, whether you are gainfully employed, struggling to keep the doors of your small business open amid capacity restrictions and decreased customer traffic, or even among the 9.7 million Americans who were unemployed as of March 2021.

Here are seven money management tips to help see you through the remainder of the COVID-19 crisis, and any other crisis that may come along in the future (and let’s face it, some of this financial advice holds true any time, crisis or not).

1. Stick to your budget (and refine it if necessary)

You’ve heard over and over again that you need to create a budget. And for good reason—when managed properly, a budget works wonders (because it allows you to take control of your money rather than allowing your money to control you). When you are in crisis mode, however, stress and shifting expenses can make it tough to stick to this budget (even if you were great about it before). Resist the urge to let your budgeting practice go during the worst of times. If you do, you could find yourself dealing with yet another financial fallout when the crisis that led you to abandon your tried-and-true budgeting practice finally subsides.

New to budgeting? Just like there are numerous tools to help you create a budget for your small business, there are also a variety of templates and programs out there to help you figure out how to keep your own budget in check. The best one is relative, but guiding principles include allocating enough money from each paycheck to cover all your fixed monthly expenses (mortgage, utilities, insurance, etc.), figuring how much you need each month to cover groceries, gasoline and incidentals, prioritizing savings and paying off debt.

2. Save/plan for big expenditures

As a small business owner, you know you may not want to dip into your working capital to pay for expensive equipment or to fund the construction of a new facility. The same theory applies to your personal finances, especially during times of crisis. Yes, it is OK—and perhaps even smart, considering the fact that interest rates are so low—to buy a new house, upgrade your dishwasher or replace an aging vehicle during a time of crisis, but it might not be a good idea to upset your cashflow to do it.

Instead, set aside specific funds to cover the costs in question. Maybe that simply means allocating a certain amount of money each month in a “dishwasher fund” or waiting to buy that new house until you have a larger down payment in hand. Either way, think twice about haphazardly putting what is supposed to be your grocery money toward a payment on a newer/more expensive car.

3. Analyze your expenditures

Just because something is in your budget doesn’t mean it has to stay in your budget. Are you actually using all of those apps and streaming services? Do you really need that monthly subscription box? Can you still afford to pay to have your house professionally cleaned twice a month? If the answer is no, press pause on these items. You can always start up again when times aren’t so uncertain.

4. Seek help

Regardless of the nature of the crisis (health, personal, business, etc.), programs exist to help people with their financial obligations during troubling times. Often, all you have to do is ask. Offerings range from the most basic, like food boxes distributed through schools, community organizations and places of worship, to more formal types of aid, like (COVID-19 specific) government assistance programs for small businesses owners.

You can also ask your utility companies and other service providers for extensions, or you can apply for aid if you need it. If it is a medical crisis you are attempting to navigate, ask your provider’s social worker about help as well—many hospitals partner with nonprofit organizations to provide financial support to patients in need.

While asking for financial assistance isn’t always easy, it can go a long way toward successful money management during a crisis because help in one category allows you to reallocate funds to a more critical budgetary category if needed.

5. Keep an eye on your credit card spending

Cash back rewards are nice, but not if you are paying interest on the purchases that allowed you to earn those rewards. While it is not usually a good idea to use a credit card to pay for things you can’t afford, it is especially problematic during a crisis because the stress of the crisis situation could result in the charges getting out of hand (be sure to pay your bill on time, too, because late payments will eventually impact your credit score).

6. Be fastidious about how you use your stimulus payments

Sure, you can use your check to buy a new TV or to treat your family to a weekend getaway. But before you do that, consider whether that is the best use of the funds. Do you have outstanding debt, or do you need cash to fund your kids’ extracurricular activities? Is your emergency fund non-existent? If so, you might want to consider putting at least a portion of your stimulus toward those practical items so you are not scrambling to cover the costs later.

7. Remember that your emergency fund is there to help you in a crisis situation.

Speaking of emergency funds, when you’ve worked hard to put money away in a savings account, it can be distressing to use that money (even when you really need it). However, the whole point of an emergency fund is to carry you through a time of crisis or to cover the cost of an unexpected expense, so you should consider all options available to you.If you’re thinking about dipping into your emergency fund, it may be helpful to plan out how you can rebuild the fund (with at least three- to six-months of living expenses) when your financial outlook improves.

Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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Tags: FinancingLine of CreditRunning a Business