How to create a budget to weather a COVID-19 layoff

If you have been laid off during the COVID-19 pandemic, there are steps you need to take right away, which we shared in a previous blog post. Whether you are anticipating a layoff or are currently experiencing one, the following steps focus on creating a budget and building emergency savings.

1) Determine Your Monthly Net Income

• If you are laid off, include any severance package and existing savings that you may need to draw from.

• Be sure to apply for unemployment insurance. The CARES Act (the COVID-19 relief law) that became law on March 2020 and the federal stimulus bill approved and signed into law in December 2020 provide additional benefits for people who are laid off. The December legislation extends unemployment insurance benefits until March 14, 2021 and includes an additional $300 in benefits per week up until that date for individuals who qualify. Know that unemployment benefits replace only a portion of your lost income.

• Look for other sources of income. Find a roommate or move back home, once the stay-at-home order is lifted and it’s safe to do so. If it’s realistic, consider developing a side job, such as stripping furniture, selling items, doing yard work, babysitting, pet sitting, etc.

2) Prioritize Survival Expenses

• Shelter: Write down your monthly mortgage or rent, utilities (including phone/internet), home owners’ insurance and property taxes (if not included in the mortgage), renters’ insurance or home owners’ association dues and necessary home repairs. Calculate everything into a monthly amount.

• Transportation: Write down your car payment, necessary maintenance, gasoline, automobile insurance, vehicle registration and parking fees. Be sure to calculate the monthly amount for each expense and include all your vehicles. If you do not have a car, include expenses for your bus pass or Lyft/Uber/taxi/Hour Car.

• Health/Medical: Do your best to avoid any lapses in health insurance coverage. This is covered more in-depth in a previous blog post. Add up medical expenses that you expect for the year, including health insurance premiums, co-pays, optical, dental, chiropractor, wholistic and mental health visits, prescriptions and anything else. Divide by 12 for a monthly total.

• Create a realistic food budget. Before the layoff, you might have spent more money on eating out and non-essential food items. In crisis mode, plan your meals, use what’s in your pantry, shop within your means and, if needed, use community food programs. 

• Calculate your monthly spending on basic clothing needs and home supply necessities, like personal care and cleaning products.

For tips on keeping these survival expenses as low as possible, see our previous blog post on crisis budgeting during tight financial times.

3) Calculate Other Expenses; Prepare to Make Cuts

• Track every other area of spending. This could include children’s music lessons and other activities, gym memberships, gifts, charities/tithing, alcohol, tobacco, entertainment, travel, salon, day care, diapers and more. Don’t forget to include any annual costs; for example, Amazon has a one-time annual payment of $115. Add up the yearly costs in each category, then divide by 12 to get a monthly amount.

• What are your monthly payments on other debts? Taxes owed? Personal loans from friends or family? Credit card debt? Student loans? Payday loans? Pawn shop loans? Back bills past due?

• Look critically at all spending. Determine which categories are not essential. Prepare to make cuts.

• Do your best to avoid using your credit cards. What you charge now will only increase your monthly payments, which already may not be affordable if you’ve experienced a job loss or reduced income.

4) Build Emergency Savings

• If you are not yet laid off, build an emergency savings account now.

• Cutting non-essential spending helps make more money available for savings.

• Try to set aside enough in emergency savings to pay for your survival expenses while you are unemployed or have reduced income. Even small amounts -- $10-$25 per month – will help.

During your layoff and other periods of financial uncertainty, it’s okay to dip into your savings to help meet your monthly expenses. However, once you have regained financial control, be intentional and do not touch those funds. Savings will be essential to cover emergency expenses in the future. Plus, you won’t have to resort to using your credit cards and create +more debt.

LSS Financial Counseling can provide additional, free support as you navigate this pandemic. If you do not have enough income to cover all your debts, our experienced counselors can help you determine your options. They will also work with you to create a budget and realistic plan for your finances. Call 888.577.2227, or get all your support online at your convenience.

Co-authors Sarah Jannusch and Mei Lin Kroll are Certified Financial Counselors with LSS Financial Counseling.