Many Americans got a tough lesson in budgeting when the COVID-19 pandemic hit. In a matter of weeks, the unemployment rate spiked to 14.8%—the highest rate observed since data collection began in 1948.1 Without jobs, families had to face the reality of surviving without a steady paycheck.
Regardless of the cause, a financial crisis can be challenging. When you’re dealing with a loss of income, having a detailed plan for how to best use your limited funds can help. This budgeting tool can serve as a starting point.
A budget with less income looks different than your regular budget: Instead of accounting for everyday expenses, you’ll need to determine the minimum you need to make it through. It may also help to find out if you qualify for any relief from certain expenses—like mortgage or rent payment relief—or pick up a temporary gig to make ends meet.
Tips for using the worksheet
This worksheet has three tabs: one for your budget, one for any income sources you still have, and one for cutting costs. Each tab of the worksheet also contains its own tips for using the section within. Like a regular budget, you’ll enter your expenses for each line item (customizing them to fit your needs), and make sure the total amount is something you can make work.
If you don’t have any income at all, your emergency fund can help you get by until you regain it. (Remember: This is why you have an emergency fund, so don’t be afraid to use it[RS1] in a crisis!) If you still have some income, use it to cover what basic necessities you can.
Breaking down the crisis budget
This budget is split into four sections: must-have fixed costs, must-have variable costs, debt payments, and sanity expenses. Your must-have fixed costs include items you need to survive, like housing and insurance.
“Some types of insurance are mandated by law, like car insurance. But insurance that may not be legally mandated, like health (depending on your state) or life insurance, is just as important,” says Brian Ford, Truist’s head of financial wellness.
However, you can certainly get rid of or reduce nonessential fixed costs, like optional insurance on your devices or an expensive phone plan.
Your must-have variable costs, like your groceries and utilities, should be pared down as much as possible. Consider dividing groceries into weekly amounts and using cash to avoid overspending.
Debt payments still need to be covered, but you should call your creditors to see if they have any payment relief options.
Finally, you have your sanity expenses. Set a little aside for your mental health. A little break can actually make a huge difference, even if it just means a $1 ice cream cone. Consider free options for fun, too, like a hike or nature walk. Just because you’re going through a tough time doesn’t mean you can’t allow yourself some joy.
“When we feel positive emotion, it has this effect on our brain where we actually start seeing more of what’s out there, like potential opportunities. Then, we build resources to capitalize on those opportunities,” says positive psychology expert Bright Dickson, referencing the broaden-and-build theory.
Inspiration for income sources
If you’ve lost a full-time job, the worksheet offers several ideas for finding income. The gig economy has made it easier to find simple jobs like food delivery or seasonal retail work, which could help you make ends meet. You might also consider using this time to start a side hustle you care about, whether that’s selling handmade jewelry on Etsy or providing consulting services. You could even sell belongings you no longer use, like clothes, books, or décor.
A financial crisis can show us how to be resourceful. You might find out just how creative you can be when you’re challenged to search for new sources of income.
Cost-cutting measures to consider
When you’re building a low-income budget planner, you’ve got to cut back on some of the things you’re used to. Focus on paying for your most important needs and basically cut out everything else. Here are a few ideas on where to start:
- Consider buying generic brands at the grocery store instead of pricier name brands. Even small savings here and there can add up.
- Temporarily reduce your retirement contributions, if necessary.
- Cancel those recurring hidden expenses that may be quietly draining your bank account.
- If you’re a two-car family, consider selling one of them if you can make it work and really need the money. (You’ll save on car maintenance costs that way, too.)
Read more: 7 effective tips for reducing your expenses
It’s OK to ask for help
Everyone’s financial situation is unique, so when you’re budgeting with less income, it’s up to you to determine how drastic the measures you take should be. But know that it’s OK to ask for help when you need it. If you feel lost financially, consider seeking expert advice by searching for a free financial counseling service. And keep in mind that even just talking about your stress with someone you trust, like a close friend or family member, can help lift some of your burden.
“For so many people, the tendency is to turn inward as a response to shame—but that doesn’t get you what you need in that moment. What you need is community. What you need is connection,” says Dickson.
Focus on what you can control and remind yourself that this is temporary—you won’t be in this situation forever. Think about what you’re learning from this experience and celebrate your resiliency. And finally, know that you’re not alone.
“Remember that most people go through something like this. It happens, and it’s common,” says Dickson. “It doesn’t mean that you’re a bad person. It just means that you’re having a problem. In many cases, you can fix that problem in many different ways.”