2021 is a tough year to plan for. So far this year, we’ve been in lockdown for eight weeks with another five weeks ahead. After that, who knows?
For many families, the pandemic has affected their income and with much uncertainty, it can feel difficult to budget and plan. However, financial planning could be the one thing that brings some certainty to this uncertain situation.
Whether you’re trying to keep things afloat at home or you want to grow your business, finance expert Susan Hayes Culleton has advice for Irish Country Living readers. As a financial trainer and public speaker – where all of her interactions were face to face or at events – she has had to put her own advice into action:
What’s your goal?
When it comes to financial planning and budgeting, one of the most important questions to ask is what is your goal?
Perhaps you lost your job during the pandemic or you’re suffering from lockdown fatigue. Your goal could be as simple as making sure the bills are paid and there is food on the table so you aren’t worrying about money every day. For another family, the goal may be planning a family holiday so they have something to look forward to. Another person might want to reduce their workload for better work-life balance. Thinking about and writing down your goal will give you direction and a sense of purpose.
Setting goals isn’t just important for households. When running a farm or business, it’s important to think about what you would like to achieve. But be careful not to make assumptions. For example, if you are a business owner that is part of Enterprise Ireland or Local Enterprise Offices (LEOs), you’ll often hear about the metrics of jobs, innovation and export, so you may assume these are your metrics too. But is that right for you this year? What do you want at this time? For some businesses such as a takeaway coffee shop, the pandemic is an opportunity to grow that business. For others however, your goal for this year may be just keeping the business going and holding onto the family name.
Building a budget
Your goal will give you direction toward building your budget. The website, consumerhelp.ie, is a great resource that guides you through creating a budget with helpful templates and money saving plans.
However, budgeting isn’t just a technical task. It can be tough to tackle, especially if you feel it’s a bit hopeless. So you need two things – acceptance and empathy of your own situation. Acceptance that this is where you’re at and empathy that it doesn’t have to be this way forever and other people are in a similar situation. Remember your self-worth does not equal your net worth, meaning the amount of money you have in the bank does not equate to your self-esteem. This is an uncertain, unpredictable time and just because you may not have paid work does not mean you don’t have a work ethic.
Creating a budget can give you direction and purpose, even if it means you only have one more euro this week than you did last week, it’s still an improvement. That’s when it starts to become about hope and moving forward.
Create a cashflow statement
Bringing the budget a step further is a cashflow statement. This is where you say: “Right, we’re getting a payment of €350 on 10 March, our food shop on 11 March will cost €100, our electricity bill which is due on 17 March will be €80 etc.” It’s outlaying your income and expenditure on actual dates. This can be one of the most anxiety reducing exercises because you’re seeing when the money is coming in and how long it is going to last and you see that its all very manageable.
However, if you do find a shortfall, then you’re seeing that coming down the line. Crunch time may be in six weeks so you may need to find a new revenue stream or a new customer if you are a business. Or it could be that you need to talk to the bank, whatever the case may be. It’s helping you to plan. This is what we clung onto during start of the pandemic when our business fell off a cliff.
So you’ve got your goal, did a budget, even devised a cashflow statement. You have some sense of security, a buoy in a storm but then a new wave crashes in the form of more restrictions. How then do you deal with this unpredictability? How do you mentally budget?
This is where scenario planning comes in. So you ask yourself: “If things open up on 5 April, what will we do? And if they don’t open on 5 April, what do we do then?” Having a plan in place, something solid to hold onto will help.
Perhaps you also need to have an honest conversation about how long your business can survive. For example, what if someone can’t open their pub again? That is a scary conversation because it feels like an end date to something. However, by facing this scenario and talking it out, you’re moving it into a space where you feel you can influence the situation. For example, if the pub doesn’t open again, you can do X, Y and Z.
It may never come to that but facing the situation may give you a sense of comfort. When scenario planning, remember to focus on the controllables and what you can influence.
Household board meetings
Unconventional board meetings are our thing. My husband and I used go to a restaurant on a Friday night and have our board meetings over a glass of wine where we would discuss the business or our household budgeting. This changed to a takeaway coffee in the car. However, these meetings have been massively important for us. I have a diary to write down things to discuss at our board meeting and it became like a worry diary. I would write it down and then close the diary knowing we would deal with it on Friday morning, I didn’t need to worry about it before then, it was critical for our mental space.
Sometimes these meetings need time, so that you work through things. Other times, things might be going smoothly and it’s just a matter of checking in and making sure everything is on track but it means nothing is put on the long finger. You’re talking about the problem rather than worrying about it.
The most important time to look at your budget is when the pressure is most acute and that’s not just the financial pressure, it’s the mental pressure as well.
For more information on Susan Hayes Culleton’s services, log onto hayesculleton.com