I had a 50% reduction in my income because of the pandemic. How do I adjust my family budget to this new reality?

 

Planejar maintains partnerships with some media vehicles for publishing content, with the objective of disseminating financial education and the financial planning activity, by means of responses to questions from readers, performed by volunteer spokespeople, covering issues related to personal and family financial planning.

The partnership with Época Negócios, an important economy and business magazine, occurs on the online column Seu Planejamento Financeiro (Your Financial Planning, in a free translation from Portuguese), published on Tuesdays at https://epocanegocios.globo.com/colunas/Seu-Planejamento-Financeiro/plantao.html. In spite of the vehicles having different audiences, the focus is on the individual consumer.

I had a 50% reduction in my income because of the pandemic.
How do I adjust my family budget to this new reality?

The crisis caused by the Covid-19 has generated a strong impact on the finances of the population and, consequently, the concern for honoring commitments in addition to the uncertainty of when everything will return to normal.

In delicate times such as these, it is fundamental to reorganize the finances together with the emotional balance for you to make decisions more consciously. It is a great challenge, especially when you have the income reduced by half or even to nothing, as in many cases. But it is necessary to adopt an attitude and go on. The following are a few guidelines that could bring a little more tranquility to you at this time.

Start by gathering your family and exposing the reality. Let them know that your income has decreased and everyone’s commitment will be important in this new phase.

Make a detailed control of expenditures, with special attention to small expenses, which often go unnoticed. This way it will be possible to see the real situation of the family budget.

Having done this, it is time to set expenditure targets and to talk about what should be reduced, eliminated, or postponed. Begin by variable costs, over which we exercise some type of control, such as personal and leisure expenses, and water and electricity bills. Discuss as well the possibility of reducing fixed costs, such as housing, in which case an even greater effort will be needed which will involve changing the standard of living. And, most importantly, talk about how each family member will need to act to fulfill these objectives. Post expenditures daily and, at least twice a month, show everyone how they are doing regarding this challenge.

If you have debts, contact your financial institution and negotiate terms and rates to give your budget more breathing room. Negotiate your rent as well, proposing a discount and grace period.

If, even with these adjustments, you still need more breathing room, consider the possible sale of an asset to have some “cash on hand”. An example might be selling a vehicle, which will require adaptation to different means of transport.

You must have already heard that crises also generate opportunities. So be aware, observe the needs of people in this pandemic and see how your skills can bring solutions, enabling the generation of income and services for you and the entire family.

Do not forget to celebrate the achievements, however small they may seem. After all, you called upon everyone from your home to contribute towards the same objective, didn’t you? Talk to your son regarding how much he has helped to save on electricity expenses.

With a new attitude in monitoring expenditures and the emergence of a new source of income and, who knows, in a near future you might already begin to save resources, start to build an emergency fund and to put into practice the projects you postponed? After all, this is a transition period and you must remain focused on achieving the short, medium, and long-term objectives in your financial planning.

During this time of transformation and many lessons, we need to put ourselves in the other’s shoes and notice how much we can help, either with words or attitudes. You can rest assured that we will come out of this stronger. Count on the support of a professional Financial Planner to help you on this journey.

João Carlos Botosso, CFP®️