HIGHLIGHTS | Financial help is available
- A 50/30/20 budget is ideal but may need to be adjusted during the economic crisis.
- To save some money, write down what you spend and then cut back on nonessential items.
- PEBB-eligible UW employees can get help from a financial advisor for free through UW CareLink at 866.598.3978.
- UW employees can also speak with both a Fidelity agent at 800.603.4015 and a TIAA agent for free.
The pandemic has changed our routines, policies and, yes, finances.
If you’re looking to cut back on spending, you’re not alone. In fact, there are plenty of folks who want to help.
Here’s how to retool (or create) your budget, handle investments and make it through financially rocky times.
Where to start
First things first, start by setting some financial goals. These can be anything from affording a down payment on a car to covering the necessities for your family.
“The goals give you a reason to go through the work of creating a budget and cutting back,” says Stacey Black, a lead financial educator at BECU, one of The Whole U and UW’s financial partners.
Keep a journal of everything you spend money on so you can track where your paycheck is going, or go look at your bank statement to get a snapshot of your spending.
By doing this, you’ll be able to see all the small purchases you make, which can add up to a lot of money over the course of a month. Seeing where you are spending your money can help you create a roadmap of where to cut back and save.
The anatomy of a budget
Once you have your goals and an understanding of your spending habits, it’s time to build your budget.
A basic budget should be made up of roughly three components: essential spending, discretionary spending and savings.
Essential expenses include items that you have to pay for each month: housing, food, child care, healthcare, transportation and the minimum payments on any debt you may have. Black recommends allocating about 50% of your take-home pay to this category.
Discretionary spending should make up about 30% of your budget, Black says. This category is a catch-all for other expenses and wants, whether it’s enjoying fun money, saving toward one of those goals you made, or paying larger sums each month toward debt.
The final 20% of your budget goes toward savings, which includes retirement savings and emergency savings, or a rainy-day fund.
According to Fidelity, your retirement savings should be about 15% of your pretax income and emergency savings should be about 5% of your income, working up to 3-6 months’ worth of living expenses, just in case.
Budgeting options when money is tight
While the 50/30/20 budget described above is a great starting point, it’s not necessarily realistic during the current economic crisis.
For example, in order to pay for your essential expenses, you may not be able to put as high of a percent as you would like toward retirement. Similarly, instead of saving for an emergency fund, you may currently need to utilize any emergency savings that you have.
Luckily, you have some options.
One straightforward route is to cut back on nonessential spending. Take a look at that spending journal and see where you might be able to save. Opting to cook your own meals, find free entertainment and cancel monthly subscriptions can all help increase your cash flow.
Another potential option is to delay certain payments or loans. Start by listing out your expenses by priority level to see what necessities you can cover. If there are certain payments you can’t make, reach out to the companies or your financial institutions to see what relief they are offering.
“A lot of companies are working to help consumers, especially right now,” Black says.
What to do (and not do) with investments
Regardless of if you’re new to investments or if you’ve been following the market for years, when the Dow takes a nosedive, it’s alarming. So, if the recent market roller coaster has you more than a little concerned, you’re not alone.
One of the best ways to navigate these intense swings in the market is to make sure you have what Fidelity calls a “SWAN portfolio,” or a “sleep well at night” portfolio.
This means choosing an investment plan that matches your risk tolerance.
If each drop is sending you into a panic, consider taking a more conservative approach with a mix of stocks, bonds and short-term investments that you are comfortable with. You’ll also want to take into account your goals and timeframe.
No matter what you choose, try to remove your emotions from your investment decisions. It’s easy to get scared when the market dips, but selling your investments when the market is down can actually lose you money in the long run.
“It’s hard not to panic and easy to just want to sell everything,” Black says. “I tell people: take a deep breath, pause and definitely talk to an expert before making decisions.”
Where to access support
If you are struggling to pay for basic needs, there are resources available to help you.
Check out UW CareLink’s resources for accessing food, prescriptions and emergency shelter or call 211 to find help services from Washington state. You can also apply for UW’s COVID-19 Employee Emergency Fund for a critical, temporary and unforeseen financial hardship due to COVID-19 for expenses related to housing, utility bills, medical expenses not covered by insurance, critical transportation costs or child and adult care expenses.
And, if you are a UW employee, you can access free sessions with a financial advisor (866.598.3978) through UW CareLink or speak with a Fidelity representative for free (800.603.4015).
- Find more financial tips on The Whole U’s website.
- Employees with Net IDs can access free educational webinars from The Whole U partners, including BECU and Fidelity.
- Find additional financial resources for Washington state employees.