The Importance of Budgeting During a Recession
Aug 13, 2020
Now more than ever, personal budgeting is necessary. Local experts offer advice.
Kemp said to create a category for “needs” like rent, loans, utilities, travel, and groceries, but also “wants” like entertainment and small impulse purchases. He said that a budget is a way of asking yourself, “What do I value in life?” and allocating your money in a way that works for that. Once you have an estimated budget, he said, you can go a week or two and come back to it and see how your spending ended up aligning with how you wanted it to.
Joseph Cash is a certified consumer credit counselor at FamilyMeans, as well as a coach for the McDonell-Regis youth soccer team. He said that one mistake new college grads tend to make is biting off more than they can chew financially.
“There’s an old cliché: You don’t plan to fail, you fail to plan,” Cash said. “People I meet in financial distress ended up there due to lack of planning, so it’s good to pause and take stock of where you are, and take assessment of what’s going in and going out.”
When asked how to best prioritize student loans in a budget during a recession, Cash said it is never good to not pay your loans. If you have a federal student loan, it is in deferment right now – meaning they aren’t asking for payments and interest is not accruing. Some private loans are deferred at this time as well, so it’s best to contact your creditor to find out. If not, it’s good to be in contact with them about how to make payments you can afford. Cash said that most creditors are willing to work with you if you are willing to work with them.
In a strong economy where you know you have enough money after bills, it might not seem like a big deal to keep track of your finances. This can change dramatically during a recession, like the one we are in now. People learned during the 2007-09 “Great Recession” that it is important to save as much as you can in case of a job loss and to avoid financial risks.
Kemp said the current pandemic-related recession is not very similar to the Great Recession, but he advised that during a recession you should try to build and maintain useful money skills.
“There’s really no comparison to this,” he said. “This is more like a hibernation. I still believe that’s the best analogy we have because through our own choice we basically stopped or slowed the economy. That’s not what happened during the financial crisis 10 years ago.”
Creating your first budget can be overwhelming, but it’s less overwhelming than not knowing exactly how much money you have coming in and going out.
FamilyMeans Consumer Credit Counselors can help you to create a budget and get your finances on track to success! Get started today by calling 651-789-4014 or by filing out our online form here.
Written by Felicity Bosk
Published on Wednesday, August 5th, 2020 on VolumeOne.org On the Money Guide (Link to Original Article)