COVID19 has decimated the economy, and as a result, companies have been struggling to generate business. Many companies have laid off their employees, and some has furloughed for a limited period. Although you have a job to return to when the furlough period expires, it is not easy to manage your day-to-day expenses.
If your company furloughs you, it means you still have a job, but you do not need to go to your work until the furlough period gets over. Even though you are to stay at your home, you will be on the payroll. However, you will be paid less than your monthly salary. According to the policy, you will be paid 80% of the total pay of your month.
When your company furloughs you, you should ask questions related to other benefits, including paid leaves, health insurance, and the like. If any doubt comes to your mind later, do not hesitate to contact your human resource department.
Since you have been put on a furlough period, you need to be careful with your budget and spending habits. Here are some tips you should consider to handle your finances while being furloughed.
Assess Your Financial Situation
Before you get to grips with your spending, you will have to look over your current financial situation. Since your pay is cut, you will have to dip into your savings. Getting organised is a key when cash is not flowing in, and your savings are shrinking.
You will feel more in control of your expenses by staying organised. Of course, your financial situation will be shaky, but you cannot do anything except bury your head in the sand.
- You should evaluate how much money you have been spending to meet daily expenses.
- What expenses should you whittle down?
- Record all income sources to know how much you have to pay all expenses.
- List all of your debts, including credit card bills.
Having expenses lined up, you will know how much you have and how much you can afford to spend.
Roll Up Your Sleeves
If your expenses are more than your income, you will have to adjust the spending. Get the list of your expenses and identify your top priorities. For instance, if you have debts to pay off, first, you should settle your dues and then you should think of other expenses. Delaying in repayment can lead to having a CCJ issued against you. Once you have a CCJ on your report, you cannot apply for a loan except loans for CCJ with no guarantor where bad credit may also not be an issue if applied from the direct lenders. To avoid such circumstances, you should not put off loan repayments.
If you cannot stay on top of your expenses despite cutting down, you should figure out the ways to increase your income. Freelancing or a part-time job can help you tide over, but it will be hard to get the one during COVID19.
Differentiate Needs From Wants
Apart from paying off your debts, you will need money to cover your basic needs such as utilities, food, and transportation. However, most of the time, people fail to differentiate their needs from wants.
Needs are necessities. You cannot live without them, and wants are things you desire to have. For instance, food is your needs, but buying branding clothes is your desire.
When you are on a furlough period, you should be judicious with your spending. Since you can manage to live without expensive clothes, you should not fritter away money like this. Try to learn to make do with available things.
If you cannot decide whether to spend money, you should ask yourself if you can live without it. Can you put off spending? Make sure that you spend money on your basic needs until your financial situation recuperates.
Keep Your Lenders In Loop
If you are struggling to manage your debts, you should talk to your lenders immediately. Informing them before your repayment can help you escape interest penalties and late payment fees. Let them know about your exact financial condition. If you tell them before the due date expires, they will be able to offer you a new repayment plan that suits your financial circumstances.
If you have multiple debts, you should prioritise your lenders. For instance, mortgage repayment is more important than a credit card bill. Otherwise, you will lose your home. Further, not always you will get a favourable deal if you talk to a lender about a solution.
Handling finances when you are on a furlough period is not secure at all, but you can stay on top of your expenses if you stay organised. If you do not have enough income to meet all of your costs, you have only two options left – either cut back on expenses or increase your income.