The COVID-19 pandemic has sent the country and indeed the whole world into a frenzy. For most of us, this is completely uncharted territory. Consequently, we might not be fully cognisant of the pandemic’s financial implications and can easily find ourselves making a few budgeting mistakes that end up hurting us.
Here are 4 particular budgeting mistakes to be on the lookout for during a pandemic.
1. Failing to budget and live below your means
If you are one of the lucky few who are still financially comfortable several months into the pandemic, you may decide not to keep a budget. You may continue living life as usual, assuming that things will return to normal soon. Unfortunately, failing to make a budget might be a major mistake during this pandemic.
You are probably right in thinking that the current situation will not last forever. There is no telling how long it will take for normality to return, however. According to the Office for National Statistics, expectations for how long it will take for life to get back to normal are getting more pessimistic, with nearly half of all adults in the UK believing that it will take more than 6 months.
We also don’t how much worse things might get before they get better.
Consequently, it might be a good idea to make a budget now with the goal of saving as much as possible for worse times. Try to avoid extravagant spending, and live below your means. You can find a few useful tips in this article on how to get inspired to save more money.
2. Digging into your emergency fund when you don’t need to
In a pandemic, you may be tempted to dig into your emergency fund. However, unless you are going through a real emergency, try to stay away from it. The money might come in handy should you, for example, unexpectedly lose your job because of the pandemic.
3. Taking on new debts
In good times, taking on new debt such as a car loan may not seem like a problem. However, in a pandemic, things are quite different. What happens if there is an adverse effect on your livelihood? What happens if you are unexpectedly laid off from your job? You could easily find yourself racking up unmanageable debt, ruining your credit rating and potentially ending up in a financial hole that may take years or even decades to get out of.
In short, taking on debt during a pandemic may be a budgeting mistake that could end up complicating your financial situation.
Rather than taking on debt, a much better option is to find new ways of making money. Our article on how to make money from home online can help you get started. The extra cash can supplement your income, reducing your need to take on new debt.
4. Panic-selling your long-term investments
Often when people see the value of their investments such as stocks falling during a pandemic, they are tempted to quickly sell them to reduce further losses. However, even in the midst of a pandemic, this might prove to be a major budgeting mistake. No one truly knows what the after-effects of COVID-19 will be. However, history has consistently proven that following every economic downtown is a recovery.
Unless you truly need the cash, it might not be in your best interests to sell your stocks just because the current economic environment is uncertain. Consider whether, if you hold off panic-selling your investments, there are relatively good chances of them bouncing back and increasing in value once the pandemic is over.
Key takeaway
It might not be possible to get every financial decision right during the COVID-19 pandemic. However, avoiding the aforementioned budgeting mistakes may help you remain financially stable during these tough times.
