How to Prioritize Your Monthly Expenses During the Coronavirus Pandemic 

During the coronavirus pandemic of 2020, personal and household finances have been thrown into chaos for many individuals and families across the US and beyond. With so many businesses shuttered during the stay-at-home orders in most states, chances are high that your own business or employer has made cuts in your hours, your income, or both.

How should you prioritize your expenses during the coronavirus pandemic?

During the coronavirus pandemic and other natural emergencies, prioritize your household’s expenses from 1 to 5, with one being survival needs and five being long-term wishes you would not miss even after several months of doing without them.

Importance of Priorities 

Prioritizing your expenses not only creates a plan for you to pay your bills in a rational way but also offers you a step-by-step process to ensure both your short- and long-term financial stability and success. Personal finances are loaded with emotional baggage that often leads to poor choices. Instead of saving for your next vehicle, you spend on the convenience and pleasure of dining out three or four times a week, meaning you end up financing your next car and paying an extra $1,000 to $10,000 in interest over the life of the loan.

Using priorities categorizes your expenses without the misguiding influence of your immediate emotions. Use the following guidelines to prioritize your expenses into one of five categories, after which you can ensure your current income is going to your most important expenses. The lower the priority number, the more important it is.

Identifying #1 Priority Expenses – Survival Needs

Start by prioritizing your survival expenses and assigning them to category 1. Survival expenses include those things that you need to stay alive as a human being. These typically include:

• Certain Protective Clothing (Seasonally appropriate)

• Certain Medications or Medical Procedures for Some People (both physical and mental health)

• Groceries, Canned/Bottled Foods, Housing (rent, mortgage, critical utilities, insurance)

• Savings (Emergency Funds for future survival needs)

During emergencies, be sure to take care of your shelter, security, and food above all other expenses. While it is true that some people survive on the street without a home, it is also true that the life expectancy of the homeless is 20 years less than for others. No wonder shelters are among the first things emergency personnel set up during disasters.

It will not help in the short term, but over the long term, many households should reconsider their current housing obligations. Because housing makes up the largest monthly expenses in most households, it also offers the greatest opportunity for saving the most money. Downsizing your home or moving to a less-exclusive or less-desirable neighborhood to save significant amounts of money each month is a possibility, even if a difficult one to consider.

Security during emergencies might involve more than just a roof over your head. Although some will believe security involves door locks, security systems, or even firearms, your security during emergencies will be best served by having a well-stocked first-aid kit and a reasonable stock of necessary products (2-4 weeks’ worth). These will include toiletries and sanitary products, soaps and shampoos, hand sanitizer, wipes and diapers for babies, flashlights, batteries, medicines (over-the-counter and prescription), and water-purifying tablets, matches, and candles, and even a barrel of fresh water.

While these may seem like critical supplies to have during the pandemic, be aware that trying to purchase them in the middle of an emergency will catch you up in the price wars endemic to the law of supply and demand. Set reasonable expectations for yourself and your household with regards to what you will actually need before setting out to purchase everything all at once. Then, as you emerge from the pandemic, make a conscientious effort to procure one item at a time to avoid budget overload.

Identifying #2 Priority Expenses – Critical Wants

The next category of expenses will include your critical wants. While it is possible to survive without these expenses, their absence will seriously affect your quality of life. Such priorities include:

• Cell phone and Communication

• Childcare

• Debt Payments

• Internet

• Transportation (fuel, insurance, maintenance, car payment)

Many want to argue the necessity of both transportation and cell phones in today’s society, wanting to move them to priority #1. However, if one human, let alone millions, can survive without them, they are not physical survival needs. No doubt, being without transportation or a cell phone can lead to extreme inconvenience. Inconvenience, however, has more to do with your expectations than your survival. The same can be said about Internet service in your home.

Similarly, many believe childcare should be a top priority because, without such a service, you might lose your ability to work at your current and many other places of employment, meaning you won’t have the income to pay for rent/mortgage and food. However, you have options, from different providers to government assistance, to family and friends, especially when emergencies occur.

Like housing, your choice in transportation often obliges you to a large, recurring monthly payment. Reconsidering your transportation choices (size, new vs. used, purchase vs lease) can open opportunities to save a large amount of money in both the short- and long-term.

In contrast, many might believe debt payments should be lower on the priorities list. Unfortunately, such arguments explain why so many households are struggling month after month with excessive consumer debts. Debt is both a personal and a legal obligation. Besides promising to repay as agreed (your personal obligation), the lender has legal rights if you do not pay as agreed. In the cases of a mortgage, vehicle, or recreational vehicle, this usually includes the option to repossess or foreclose on the property. In other cases, it might involve, at a minimum, reporting your late or missed payments or, in extreme cases, taking you to court, winning a judgment against you, and garnishing your wages.

Identifying #3 Priority Expenses – Personal Preferences

These middle priorities include the rest of your household’s recurring expenses, whether on a daily, weekly, or monthly basis. These typically involve personally important wants that you choose to have as part of your lifestyle. Examples include:

• Cable/Satellite TV

• Daily Gourmet Coffee

• Dining Out and Food/Grocery Delivery

• Storage Fee

• Streaming Media

• Subscription services (music, technology, yard service, cleaning, “box” of the month, shaving clubs, etc.)

Priorities from this third category of spending often become the target of people trying to cut expenses, either temporarily or long-term since they are admittedly preference-based purchases. Most of these expenses are relatively small in comparison to housing and transportation costs. For this reason, others push back against related cutbacks, arguing that their elimination will not save enough to make much of a difference.

Herein is the problem. Individually, these are small purchases. However, when your household incurs dozens or even scores of small, regular expenses, they end up in many households amounting to more than what the household is spending on both the house and the vehicle together.

During emergencies, you may think it obvious to stop dining out or grab your daily gourmet latte. However, you should also contact your service providers to ask about putting services and their corresponding payments on hold for the short term. Over the long-term, if finances are tight, you should also reconsider which subscription services are most important and which can be eliminated or moved to a lower plan.

Identifying #4 Priority Expenses – Trivial Wants

Priorities in this category include one-time wants that many would consider trivial. Certainly, during emergencies, you would not miss them, even if there are available. These expenses include:

• Gift Giving

• Going to the Movies

• Paying for Tattoos

• Purchasing Video Games

• Purchasing Clothing Accessories

• Upgrading your Technology

The danger with these types of purchases during emergencies such as the coronavirus pandemic is that they often satisfy (albeit only temporarily) our urges to do something to relieve stress. These are the “retail therapy” expenses that can wreak havoc on our finances, in good times or bad, because they can get out of control in a hurry. We spend on these expenses usually on impulse, not considering ahead of time how the purchase will affect our household budget.

When emergency situations occur, it becomes much easier to do without Priority 4 expenses. However, the stress of emergency situations can manifest itself in odd ways. During the initial weeks of the coronavirus pandemic of 2020, the uncertainty of the situation and the many unanswered questions about the virus itself created a feeling of helplessness around the US and the world. As a human response, many people preferred to do something rather than nothing. This includes purchasing months’ and months’ worth of toilet paper, creating shortages and purchase limitations at every store, brick and mortar and online alike. It did not matter that most people would not need that much TP or that the stores would normally have additional supplies on their shelves the next day or the next week. Consumers went crazy out of fear and purchased every scrap (figuratively at least) of toilet paper they came across.

During an emergency (prior would be ideal), create a budgeting category for your household spending that you name “splurging” or “sales opportunities.” This involves putting money regularly into a separate saving account that you can access any time you come across incredible deals or opportunities to make purchases not available at other times. Once, however, your splurge fund reaches $500 to $1,000, stop adding additional deposits and, instead, work on other short and long-term financial goals.

Identifying #5 Priority Expenses – Long-term Wishes

The final category of priorities is #5. This is where you include big, long-term wishes that you want to work on but will need months if not years to achieve. Examples include:

• Business Startup

• College Tuition

• Down Payment for a Home

• Home Repair

• Next Car

• Travel

• Vacations

Because these expenses do not recur every month, you can easily divert your attention from them during emergencies to more important and pressing priorities. We usually recommend you work on long-term goals like these by setting up automatic monthly transfers from your main checking to dedicated savings accounts. During emergencies, jump on your financial institution’s website or app and temporarily suspend the transfers.

What to Do After Prioritizing Your Expenses

When money is tight or discretionary money is nonexistent, such as in times of national emergencies or local disasters, start reworking your household budget immediately by removing all expenses from categories 4 and 5. If this still does not free up enough money for your necessary expenses, begin eliminating your purchases listed under category 3.

Finally, if your survival expenses are still threatened by a lack of spending money, you may need to consider revisiting your expenses under category 2 in order to restructure them or, if need be, eliminate them.

For example, you might work with your phone service provider to move you to a more affordable cell phone plan. You might also consider downsizing a vehicle or getting a reliable one that is a bit older or smaller in order to save more money each month.

Related Questions: 

• How do you get caught up with bills during the coronavirus pandemic? Most people are driving less during the pandemic. Use the amount of money usually spent on gasoline and dining out to get caught up on household bills and to pay down debts.

• What are the most important savings goals during the coronavirus pandemic? During the pandemic and other emergencies, your main short-term savings goals should focus both on critical physical and emotional needs, including care of your housing and food but also on stress-releasing activities like travel and social events.