Preparing A Budget for Post-COVID-19
Like everyone, I have been locked in doors other than the odd walk with the dog and spending some time in the home gym. A natural restriction on what I can spend has become the common trend during Level 4 & 3.
Certainly, a lot of us may have browsed online shops, but with the difficulties of delivery, it has remained just that. Over March and April, most money transactions have been towards Netflix and groceries.
This sudden and drastic drop in spend has given many the opportunity to go back and review their bank statements from the last few months. It has encouraged us to scrutinise these subscriptions we have with Apps we seldom open. Or question why we really need that much coffee when it is free at the office? We have been able to see where we were spending money and ask ourselves why?
Those extra coffees, the extra Uber eats, the cost of a full round of beers and wine for your colleagues, they add up – considerably in fact. Those total sums could equate to almost a full month’s mortgage payment. Imagine being able to comfortably pay that amount alongside other expenses?
It is the COVID-19 lockdown situation that has finally brought that to life.
A mindset is being adopted by Christchurch people where a new loan or house in 2020 could be a real possibility, especially for those still within work, still on the same salary. By reducing the overheads on non-essential items or activities, we are seeing what money we have available for more meaningful things. As a result, dynamic situations and customers are coming through our doors, and getting themselves good mortgages, fast.
We have shared this advice before, but now is the time to look at bank statements in their entirety. At a minimum start with January and February. But aim to go back six to twelve months and deep dive into what you have been spending. Compare this with what you have spent since March 25th this year. Are there clear spaces to tighten up expenses?
Next, look at your operating expenditure and what you are spending money on, that you may not necessarily need, but making sure you still maintain some sense of enjoyable life to lead. Making sure you are rewarding yourself for the daily grind is important.
Another option, as a borrower, is to look at all your current debts that are costing you money each month. Vehicles, hire purchases, small personal loans, you can consolidate all of these to get a strong hold on monthly payments and interest. This may result in a lower monthly payment as well helping to take pressure off during these challenging times.
Once you have a clearer picture, start setting some goals and budgets in place so that you are putting yourself in the best position to be successful when you apply. For example, if you have rid an expense that you no longer need, set that as part of the sum you are now going to save. Make sure you can see those savings and that work you are putting in.
On my last blog, we talked about the banks taking a strong interest and reviewing line by line what people spend through their bank statements. If you as a borrower can make sure that you minimise your spending, show that you can save and tidy up any superfluous and unnecessary costs that you've got, this will certainly work in your favour.
COVID-19 could in fact be the opportunity for you to put yourself in a stronger position.
Your living expenses that will need to be declared are already on track to being lower if you follow the above exercise. But also, by having a more stringent budget or to understand where you spend your money, it is going to help you save and build a bigger deposit towards buying a property.
This is the key takeout from this mini-series; use this downtime to prepare and manage your future financial situation.