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Budgeting in the age of COVID-19

Justin Chow

Budget for COVID-19

Things are a bit mental right now. 

As the COVID-19 pandemic escalates and the government response increases, life feels like it’s out of our control. 

There’s no denying the seriousness of the situation, and I’m sure you don’t need us reiterating this for you (make sure you’re practising social distancing!). But this context is critical when considering how to set up your budget; one of the key areas you can regain some control.

As you venture into the world of adulting, the significance of managing your money comes at you hard and fast. Even more so now in a time of huge uncertainty - not least in our communities and health system, but also our economy and viability of our jobs.

If you’re like me though, budgeting isn’t something you’ve spent a lot of time on. There’s a ton of information out there around budgeting, but truth be told, there’s no secret formula to it; different things work for different people. 

To help figure out what works best for you, we’ll cover some core principles when it comes to budgeting:

  • Setting one up; and
  • Sticking to it

 

Want to know why you should budget? Too bad, figure it out yourself!

I know - weird way to kick off a piece that’s supposed to help you figure this out, but bear with me. 

Not trying to scare you into a premature quarter life crisis, but it’s time to have a quick (and deep) think about some of the key things you need to save for in life - both in our near term COVID-19 situation and more broadly once this is over. Whether it’s having enough savings to buy-out the next stock of Coles toilet paper (don’t actually do this), buying the latest virtual reality technology to hang out with your friends, traveling the world to build your fridge magnet collection once this is over, buying a petrol-guzzling Jeep or securing the deposit for your dream mortgage house - believe it or not, these will all likely require some level of budgeting.. even the fridge magnets. 

The point is, it needs to be you (not me) who determines why a budget is important for yourself. This will be critical in helping you set one up and stick to it.

If you’re somehow struggling to work out why you should be budgeting, then at the very least it can provide you with a financial safety net - after all, nobody wants to run out of moolah when they need it the most. Beyond covering you for the things you need, a budget will help pave the way to what you want (once you eventually figure that out).

 

Setting it up - failing to prepare is preparing to fail

So now that you’ve got an idea of why you need to budget, the next step is setting it up. Thinking ahead and being as realistic as possible will help you in practice when you need to actually stick to it!

With this in mind, it’s time to break it down! There are many ways you can go about doing this - remember it’s about what works best for you - but as a starting point, try listing out and calculating your income/expenses across some of these categories:

  • Income
  • Necessary expenses - e.g. food, bills, etc.
  • Subscriptions and ongoing expenses - e.g. Netflix, Spotify, newspapers etc.
  • Fun expenses - e.g. dinners, drinks, movies, etc. (list these out as you would for normal life so you have a good record of it, and pocket this extra cash in our near-term lock-down situation)

I prefer breaking this down at a weekly, monthly and yearly perspective, but it’s up to you if you prefer to look at a specific frequency.

At this point, the difference between your income and expenses listed above should (hopefully) leave you with a certain amount leftover. If not, then it might be time to think about whether you’re having a little bit too much fun, or whether you can shave down some of your more regular expenses. The benefit of having everything listed out is that it allows you to easily hone in on where you might be overspending.

Now, remember the ‘why’ that I was harping on about earlier? If it’s not already covered by the above then it’s time to bring this into your budget, along with some of the other items you’re wanting to save for. 

I’d also recommend trying to allocate another leftover portion for a little (hopefully soon to be big) savings pot that you can build over time. This will mean you’re not draining your balance entirely to zero every time you go on a holiday, and also means you won’t feel like you’re starting completely from scratch when you need to start saving again. After all, don’t forget the financial safety net!

So now that you’ve covered all your expenses (such a fun experience) it all becomes a bit of a balancing act from here. 

To help simplify the process of setting up, reviewing and tweaking your budget, there are a number of great apps that you can access for free. Here are a few of our favourites:

Pocketbook allows you to sync your bank accounts to immediately track your expenses and it’ll also automatically categorise them. You can also set up spend limits and reminders for upcoming bills to make sure you always stay on top of your finances.

MoneyBrilliant has you covered in terms of syncing your bank accounts, tracking and categorising expenses. It also allows you to connect other types of accounts such as credit cards, investments and superannuation, and for a fee it’ll help you find the cheapest electricity/gas deals, track your tax-deductible expenses and more.

Frollo connects your bank, investment and even overseas accounts to cover all of the basic tracking and categorisation needs. It also allows you to set up daily, weekly and monthly challenges to achieve your financial goals, and gives you a ‘Frollo Score’ to help you gauge your financial position.

You’ll even find that a number of banks are jumping on the budgeting tools bandwagon and have introduced certain features such as spend tracking and bill predictions to their transaction accounts - Up is one to check out if this is more down your alley. The budgeting apps still take the cake for now, since they can consolidate everything across your accounts held with different institutions, but with open banking on the horizon the gap is sure to narrow eventually!

 

Sticking to it - you’ve done the leg work, now don’t let it go to waste!

This is where things get a bit more difficult. A budget isn’t something you can just set up and forget about. It requires constant attention, and sticking to it is something that ultimately comes down to you and your ability to incorporate it into your daily life as much as possible. 

While your “daily life” right now is very different to normal, it’s a great time to save and stick to your budget. When life returns to normal, our tips below will help you stay on track.

Probably the most important step here is to track your expenses. Getting into this habit will ensure you maintain focus, whilst a visual representation of where you’re spending your money will help you figure out if it’s time to start cutting down on the avo toast.

Aside from this, there are all kinds of changes you can introduce into your life to help you stick to your budget - below are a few to get you started, but try and think of others that might work for you!

  • Set up an automatic transfer every time your salary hits your account to another account that you can't touch!
  • Set sub-budget limits for various categories per month/week (e.g. food, transport, rent, savings, fun times, etc)
  • Get some mates to budget with you to keep each other accountable - this also means you can still undertake fun budget-conscious activities together
  • Be kind to yourself - it's okay to go over your budget sometimes. Just get back on your wagon for the next day/week/month!
  • Find budget friendly alternatives to your regular activities and expenses so you can mix it up every now and then
  • Become a deal hunter - look for specials when you’re shopping or even jump on a family plan with your mates for some of your subscriptions (e.g. Spotify, Netflix, etc.)

Be sure to continuously review your budget and remember: planning, thinking ahead and being realistic about your situation are all critical in how effective this will be. There will be times where you’ll need to aggressively prioritise what’s important to you over the short and long term, and sacrifices may need to be made.

This may all seem like it’s just too much effort to keep up, but hang in there - don’t let all of your hard work go to waste! If you’re needing a little something extra to keep you going, try and find small ways to reward yourself within the framework you’ve already established. You don’t want to reach a point where budgeting feels like a chore. 

If this still doesn’t seem to be serving as enough motivation, then just try and draw on why you wanted to start this in the first place! 

As I mentioned earlier, change can be pretty rapid during this stage of life, and you can easily find yourself facing all kinds of unexpected expenses. Throw this on top of standard adulting stages such as going out more, moving out of home and having the Bank of Mum and Dad slowly close its doors, and money can get tight pretty quickly if you’re not prepared. Having a firm grasp on the ‘why’ behind your budget will help you navigate this like a pro and make some brave decisions on your journey to financial nirvana.

Creating an effective budget with the 50/30/20 rule

At UniBank we know that creating a budget is the first step toward taking control of your financial future. With a solid budget, you’ll see exactly where your money is going, as well as planning how much you can save each month toward your goals.

Would you like help with some simple steps toward creating a budget?

Would you like to know more about the 50/30/20 rule?

Having a financial plan is one thing, sticking to it is another entirely. We also provide some helpful hints and tips to help you stick to your budget.

You can read more about creating an effective budget below:

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* Membership eligibility applies to join the bank. Membership is open to citizens or permanent residents of Australia who are current or retired employees, students and graduates of Australian Universities or family members of members (i.e. shareholders) of the Bank.

UniBank is a division of Teachers Mutual Bank Limited ABN 30 087 650 459 AFSL/Australian Credit Licence 238981

 

You’re good to go

Simple as that - you’re now set to dive into the world of budgeting! There’s a lot to take in, but at the very least if there are a few things to take away, it’s to: focus on why managing your money is important to you; try and constantly plan ahead; and be realistic and honest with yourself about your situation and habits. While we’re in crazy times, the one thing that you can exercise some control over is your budget. Take social distancing and self-isolation as a great excuse to set it up!

Stay tuned for upcoming topics or check out or other useful articles here. We’ve got plenty more gold to help you make the leap from top student to top professional!

Got feedback? We’d love to hear from you! Shoot us an email at contact@prosple.com.

 

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Disclaimer: The information provided in this article is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs.