At the time of this writing, we are still dealing with a global Covid pandemic. Each day new information comes out about record breaking jobless claims and extraordinary unemployment numbers. People in the millions are claiming unemployment, and some for the first time, as companies of all sizes struggle through this downturn in the economy. I have been fortunate enough to maintain my job, so far, but we never know what tomorrow might hold.
My youngest daughter owns her own photography business, which has been hit hard by this economy and the social distancing edicts set forth by our government, in an attempt to flatten the curve and save countless lives. She does not pay into the unemployment coffers and is therefore not eligible to receive this benefit, like many other Americans.
During this time it is more important than ever to have a budget. Actually, you may want to create three budgets.
1. What’s my actual spending?
2. What’s my target spending?
3. What’s my absolute necessity spending?
I recommend using a spending tracking application such as Personal Capital to help you evaluate your monthly spending patterns. This will be important in creating your budget. Each dollar should fit into a spending category. As you track your spending on a monthly basis, you can begin to get control of your finances. It is important to know where your dollars are going, in order to understand which areas of spending give you the greatest opportunity to tighten your belt.
This reduced spending should be used to pay down high interest debt, increase your savings, or grow your investments. Another important aspect of the budget is to understand your spending patterns not only now, but also in retirement. This is especially important for early retirees. In order to calculate your financial Independence goals and spending needs in your retirement years, you will need to track your spending.
I have provided a link to a budget template spreadsheet in the tools section of this blog. Please feel free to use it to help categorize your spending. It is not an all encompassing budget, but should be easy enough to help you get started, in the event that you have never created a budget before.
Fire Dog Personal Finance 