This has been a difficult year, to say the least for many Americans, especially for those whose businesses have been shut down. Lots of jobs are either lost or in jeopardy, which puts people in the tough position of trying to figure out how to stay afloat when they are already just barely keeping their heads above water. Although hindsight is 20/20, it’s nearly impossible to predict such a crisis as the kind we currently face. There are ways to safeguard against future hardship, though and there are even some easy-to-follow steps you can use to improve your financial footing even as a crisis is unfolding. Try the following tips on how to adjust your budget during a crisis to climb back on top as we lean into the new year.

Take a Step Back

When you come to a crucial point where your financial standing is in jeopardy, due to loss of income, you need to act quickly in order to minimize the impact of a sudden loss. The irony is, that the action you most often need to take at a time like this is a step backward. The reason is that if you don’t stop and process your new situation, you are going to continue in a straight line, which might only make matters worse. Crises are points of decision-making where your choice can significantly impact your chances of success. To keep moving forward without a proper assessment of new information is a big mistake. Instead, take a moment to breathe and take in the full scope of your situation so you can adjust your budget accordingly.

Hoard Your Cash

After you take stock of your situation and evaluate your options, you should take money from anywhere that you can. That means you should stop spending and start stacking up cash as much as possible, but you should also temporarily or permanently put all of your automatic payments on pause. Even payments that you “have to make” should be paused in order to give you a chance to stockpile money and reevaluate what payments are the most necessary and what payments can wait. You should fight the urge to use this time to pile more debt onto your credit cards. It will only make things worse.

Prioritize Bills/Reduce Payments

After halting all of your payments, come up with a list that prioritizes who to pay. At the same time, cut any expenses that aren’t absolutely necessary. This is the part where you adjust your budget to reflect your current crisis. The budget should put minimal strain on your finances as you developed a plan to get yourself out of financial turmoil. The easiest way to do this is to look over your bank statements for the last three months and identify recurring payments. See what you are paying for and what you can give up, whether it’s subscription boxes or food delivery apps. This is especially important if you have credit cards with recurring monthly charges. be sure to stop those transactions to avoid the hit of additional interest.

Develop a Plan

Finally, with your budget adjusted to allow you to keep more cash available, get to work on a more sustainable plan that allows you to continue saving while paying down debt. Your plan might include finding additional income by taking on a second job or a side hustle. It might include implementing more budget-saving tactics. One course of action could be calling debtors and negotiating a lower payoff amount. Your personal understanding of the crisis you face will inform the decisions you make and how you plan for more financial stability.

P.S. If you found this post helpful you might also like Frugality in Case of Emergency and 5 Simple Tips for Managing Your Money