The COVID-19 pandemic that began early last year caused unemployment figures to skyrocket. Businesses, especially in certain sectors like restaurants and travel, have been affected by lockdowns and restrictions intended to fight the spread of COVID and have had to reduce their workforce accordingly.
If you’re unemployed or otherwise affected by the pandemic and the economic downturns it’s caused, you may need to manage your cash actively. It’s easy to get caught up in a spiral of debt and non-payment of essential bills during such a period – and each can exert a negative impact on you going forward.
Cash Management: What It Is
Cash management refers to the review and planning of your income and expenses on a regular basis. If you catch yourself thinking “what income?” it’s all the more necessary to do.
The chief tool in any cash management arsenal is a record of your expenses and income. It’s easy to try and live in a fog about expenses and income, especially if you’re stressed about money in this period. You may be putting off paying your bills, or waiting on government relief checks to tide you over.
[Make sure you understand every option available. Here's how bankruptcy protects you and stops creditor harassment.]
But a record allows the fog to lift. You know what your expenses and income are. If your income exceeds your expenses, even by only a little bit, you’re okay for now. If your expenses exceed your income, you have to make a plan to fix it – either by cutting down your expenses or increasing your income.
Don’t worry: if you need to whittle down expenses or hike your income, you will find a way to do that eventually. But you need to start by knowing what your expenses and income are.
How to Start
First, start recording every expenditure. You can use software or a notebook. This may seem time-consuming at first, but it will start revealing how much you spend, and in which category. As you start to get a list of expenditures, start dividing them by category and putting the totals for each category in a spreadsheet. It’s a good idea to do this every week, and then add up the weeks so you have monthly totals.
Common categories include rent/mortgage, groceries, utilities, transportation costs, car payments, credit card payments – whatever you are spending money on.
[Check out our Bankruptcy FAQ for answers to common questions about bankruptcy.]
Then, start adding up your income. Put income in a separate spreadsheet. What sources are you income from? Are they recurring, such as weekly unemployment? If so, estimate your future income for each week/month (whichever makes more sense).
After several weeks, you’ll be able to tell whether your expenses exceed your income or your income exceeds your expenses.
What to Do if You Spend More than You Make
If you’re spending more than your income every month, you’ll be facing financial trouble. You may be staying afloat with credit cards, money from family, or simply by not paying certain bills.
To manage the situation, first review your expenses now that you have a record. Group them in three categories:
- Fixed expenses that must be paid, such as utility bills or rent/mortgage
- Recurring expenses that aren’t fixed, such as groceries
- Expenses you can eliminate (if any)
Review these category by category. Examine the first category to see if you can get a break on any of these bills. Many utility companies, for example, will agree not to shut off your electricity or heat if you are unemployed and you may be eligible for reduced charges as well. Ask your mortgage lender or landlord for forbearance (a period of time in which you don’t have to pay). (Be aware that you will eventually have to pay these amounts.)
In the second category, is there anything you can reduce? Could you, for example, lower what you spend on groceries? Many people at this time have found it helpful to go to food banks to receive free groceries. There’s no shame in this; COVID has caused many people to be unemployed through no fault of their own.
Are there any expenses that can be completely cut, such as expensive cable TV packages? Can you hold off buying new clothes for the duration of the pandemic? Take a hard look at your expenses and see if there are categories you can eliminate until your financial challenges are over.
[Deciding to file for bankruptcy is never an easy decision. You're probably wondering, but where do I start? Here's how to evaluate your options.]
If You Need to Discuss Financial Challenges With a Lawyer
If you lie awake thinking about bankruptcy, you’re not alone. Bankruptcy can be a way to get out of financial difficulty. If you have questions or concerns, it’s a smart move to consult a bankruptcy lawyer. We offer a free initial consultation to discuss your situation. Set your mind at rest. Call us for free at 229-247-1211.