Gain control of your finances

Eight tips to help you manage your family budget in uncertain times, or anytime

Families have been forced by the pandemic to take a fresh look at how they spend their money. Many have lost their jobs, or are working fewer hours, or had to file for unemployment.

More than 42 million people across the country filed for unemployment due to the shutdowns caused by the pandemic, with 200,000 people from New Hampshire filing for unemployment benefits as of May 30. The state’s unemployment rate was hovering around 14.5%. In comparison, in March, the state’s unemployment rate was only 2.4%, according to the U.S. Bureau of Labor Statistics

Many of the jobs New Hampshire families lost were not only in retail and restaurants, but at several hospitals, dentist’s offices, and child care centers, which either furloughed or laid off workers.

Businesses are beginning to rehire workers, and that’s good news for workers called back, but unemployed workers will no longer collect a $600 weekly federal unemployment benefit as of July 31 — leaving more families vulnerable to sharp drops in income.

Furthermore, with almost half of the state’s summer camps closed for the summer, those parents who wish to go back to work may instead may be home caring for their children.

“Now more than ever, families need to get a clear view of their income and expenses to identify how much they should trim from their budgets,” said Amanda Bouzakine, a financial coach and founder of Broad Park Financial, based in Portsmouth. “You can only make a plan going forward once you’ve taken the time to understand where you are currently at.”

In January, Bouzakine launched Broad Park Financial, a financial coaching business that assists individuals and families with their finances. The mother of two offers virtual one-on-one financial coaching in New Hampshire and throughout the United States. Here are some tips she shares with her clients.

  1. Get started.

One of the biggest mistakes that families make when they review their budgets is not looking at expenditures until the end of the month. If you only address your shortfalls at month’s end, your money will never go where you want it to go, Bouzakine said. Instead, look at income and expenses for the next month. After you determine income minus expenses, you should see what you have left. Then, you can take a problem-solving approach toward addressing any shortfalls.

“During this time, many families are seeing more expenses than income. Sometimes the chaos of a pandemic can cause people to make decisions from a crisis point-of-view versus mindful planning,” she said. “Writing it down, you might find that it’s not as scary as you thought it was. Then you can make a controlled decision about what to do if your expenses are more than your income.”

  1. Choose a method.

Whether you choose to record your income and expenses in a software program or on paper, Bouzakine suggests using the zero-based budgeting method. In this method, you build a budget from scratch and give a job to every dollar of income you earn, she said. Alternatively, if you have more expenses than income, you can create a strategy to reduce your expenses.

  • Create a column for each pay period rather than looking at each month as a single lump sum.
  • Next, assign your expenses under the appropriate pay period. Looking at your budget by pay period allows you to more clearly view your monthly cashflow.
  • If you happen to see more income than expenses, treat that like a bill. Consider putting that in a savings or a vacation fund.

“Especially for clients who haven’t been impacted yet, and who don’t yet have a good emergency fund, they should be tightening up any extra money they have and socking it away into their savings account,” Bouzakine said.

  1. Be aware of common budgeting mistakes.

It’s easy and common for families to forget to include non-reoccurring expenses in their budgets. For example, the costs of home and car repairs, holiday gifts, and summer camp fees can quickly be forgotten since they only come around once a year.

“When these expenses aren’t built into the monthly family budget, families don’t see their true expense load and may be spending outside their means without noticing — until there’s a surprise irregular expense they’re not prepared to pay,” Bouzakine said.

  • After you make your list of irregular and non-reoccurring expenses, estimate what you spend annually in each category (for example, sports fees, gifts, repairs) then divide by 12 to get a monthly budget amount you can add to your budget.
  • Each month allocate a portion of your monthly budget toward savings for these items.
  • You can use a savings account like that lets you open multiple savings accounts with no minimums or fees and you’ll be able to pay unexpected bills without pulling out your credit card, Bouzakine said.
  1. Spend your stimulus sensibly.

The federal government this spring began issuing stimulus checks to families making up to $200,000, with households making less than $150,000 annually eligible for one-time payments of $1,200 per adult and $500 per child. If you happened to be a qualifying family of four and received a $3,400 stimulus check, you might be tempted to splurge. Instead, Bouzakine suggests you look at allocating your check toward other expenses, depending upon what your budget looks like.

  • If you have already taken a big hit to your family income, you will need this money to pay monthly bills immediately. You may be in a situation where you need to gain control of your finances right away and make big sacrifices to stay above water. Some other big steps for families in this situation could include selling a house, getting a roommate, trading in your car for a less expensive model, or even moving in with family members, she said.
  • If you have not been impacted by a job loss or reduction in hours but anticipate one, it’s important to fine-tune your budget now. Bouzakine suggests putting that money in savings right away. Prior to the pandemic, the rule of thumb was to sock away at minimum three to six months of living expenses, but now families might determine they need to save on the higher end of that range to feel secure, she said. Your crisis budget likely looks different than your everyday budget. Write out a crisis budget now to identify what you would to give up if you were forced to live within crisis budget constraints. This could mean cutting out gym memberships, dining out, etc.
  • If you have no concerns about a loss of income and a healthy emergency fund, you could use it to set aside that money for a goal, such as a home renovation or anniversary trip.
  • Finally, for those who can treat the stimulus check as extra money, Bouzakine suggests spending it in your local economy. Depending on what your income versus expenses look like, that could be as little as $50 or upwards of $500.
  1. Pay close attention to daily spending.

Whether it’s a daily coffee, weekly takeout, or an anticipated Target run, purchases you make each day add up at the end of each month. Every time you swipe a debit or credit card, you need to pay attention — you might not even realize you are overspending, Bouzakine said.

“One of the key things I work with clients on is their day-to-day spending. Families are either spending directly out of their primary checking or credit card accounts, making those transactions harder to see,” she said. “By the time you are reconciling all of these transactions at the end of the month, it might be too late when you’ve spent $200 more on groceries than you expected.”

  • Look at past statements to identify those purchases to set a monthly budget for day-to-day spending purchases.
  • Then, divide this number by the number of pay periods in each month.
  • As soon as you get paid each pay period, transfer your daily spending budget into its own checking account. Use the debit card from that account to make all of your smaller, day-to-day purchases.

“The first month you try something new, it’s never going to feel great. But by the third month, the new habit will feel more comfortable,” she said. “By having a separate account, clients feel the biggest impact it has is that they feel in control of their money and are able to spend within their means.”

  1. Use credit cards with caution.

Families should be extra mindful when they swipe their credit cards to gain points for travel or other perks. Because there is no money backed by an account that is associated with these purchases, it’s easy to rack up $500 in expenses with every intention to pay the card off monthly — and fall short. Instead, any expenditure you make should tie back to money you have in an account.

  1. Negotiate your bills.

If you or a family member has been laid off, you might find yourself behind on some bills. The good news is that you can negotiate with companies agreeable to hardship payment terms. While you might not fully be able to skip bills, you might be able to make smaller payments or even avoid paying interest. Bouzakine said.

“I’ve heard from my clients that have called around that companies have been agreeable — even credit card companies,’ she said. “There has been mortgage hardship relief and in New Hampshire, renters were prevented from being evicted (although they still had to pay their landlords rent due). When discussing your hardship with a company, be sure to ask about repayment terms and confirm the hardship won’t result in a negative mark on your credit report.” Some bills you might be able to negotiate:

  • Credit card bills
  • Federally backed mortgages
  • Federally backed student loans (Under the CARES Act, which was passed in response to economic hardship caused by the coronavirus (COVID-19) pandemic, federal student loan borrowers were not required to make payments for a period of six months, ending Sept. 30. Additionally, federal student loan interest rates have been set at 0% during this period.)
  • Private student loans (The benefits authorized by the CARES Act do not apply to private (non-federal) student loans owned by banks, credit unions, schools, or other private entities. However, you can contact your lender to see if they offer extended forbearance options and other benefits.)

“It’s important to keep a list of delayed bills — including the agreed-upon terms of repayment, so you are organized when those bills come due,” Bouzakine said. “Keep an eye on your credit report to ensure no unexpected items pop up.”

By federal law, you are entitled to a free credit report from each of the three reporting agencies (Equifax, Experian and Transunion) each year, and through April 2021 you are allowed access to free weekly online reports. It’s important to keep on top of your credit report to ensure that scammers haven’t gotten ahold of your personal information during this chaotic time, she said.

  1. Seek help if you need it.

Families who need more help controlling their finances can hire a financial coach, work with a financial advisor, or even access services through their local bank. Financial coaches like Bouzakine specialize in supporting people to make budgets, change their money mindsets and reach their goals.

“Post-COVID, people have less income and are living a new reality where they need to better understand cashflow and budget to adapt to that new reality,” she said. “For some, it’s a lifestyle shift and accountability can be hard during months of transition. Having a support system is a huge asset.”

Krysten Godfrey Maddocks is a former journalist and marketing director who now regularly writes for higher education and technology organizations in New Hampshire and Massachusetts. Krysten won three awards — gold, silver and bronze — for writing from the Parenting Media Association in 2020.

Categories: COVID-19, Money and finance