If there’s one thing that most of us learned from the COVID-19 pandemic, it’s that we can’t take anything for granted. Many people who thought that they were in secure jobs found themselves either furloughed, working reduced hours or unemployed.

At the end of 2019, who would have predicted that in just a few months, so many restaurants, movie theatres, hotels and countless other businesses would suffer so badly? Unemployment hit a record high of almost 14% and countless Canadians saw their income drastically reduced because of the pandemic.

COVID-19 also brought one of the steepest stock market crashes seen in the last 100 years, with many markets losing as much as 30% of their value. In March, the Toronto Stock Exchange experienced its biggest one-day drop in value since 1940.

While it was a fairly short-lived crash, anyone who had to sell some of their plummeting assets at this time would have lost a substantial amount of money. Traditionally safe havens, such as bonds, became less of an option as yields fell to historically low levels.

During this turbulent period, having a budget and a solid financial plan have never been more important. Let’s take a look at how a budget can get you through these uncertain times.

Preparing for the unexpected
One of the most important aspects of a budget is how it helps you to build an emergency fund. Any financial advisor worth their salt will tell you that without an emergency fund you’ll always struggle to stick to your budget and reach your financial targets.

By saving enough money to cover expenses for three-to-six months, most people can take traditional emergencies in their stride. In normal times, this could mean waterproofing a leaky basement, replacing the roof or buying a new appliance. The unexpected cost could be paid for without resorting to retirement savings or going into debt, both of which would derail your long-term financial plan.

During a pandemic, an emergency fund could help you to survive, even if you lost your job or were furloughed, without digging yourself into a big hole of debt. It would also mean you’d have a lot less financial stress.

Taking control of your spending
When money’s really tight, spending within your means is more important than ever. A budget allows you to keep your spending to a reasonable level while also making it easier to uncover expenses that you could cut back on until your income returns to normal.

Budgeting provides you with a fuller picture of your finances, so you can work out a plan to spend less, pay off debt and build up your savings. In turbulent times, you need to try and do all three.

Giving you a level of certainty in uncertain times
When you lose your job, or your income becomes less predictable, your finances can quickly become overwhelming. Having a budget allows you to see the full financial picture of what’s coming in and what’s going out. You can quickly work out if you need to cut back on expenses, somehow earn more money, or both.

A budget gives you a feeling of control over your finances when everything else may feel uncertain.

It helps you work towards financial independence
The long-term goal of most budgets is to ensure that you have enough money to enjoy a comfortable retirement. Your budget, and your financial plan, will help you to retire with enough money to never have to worry about uncertain times.

A good financial plan will also ensure that, when you’re retired, you have enough of your savings held in liquid cash accounts. By always keeping two years’ worth of expenses in an account that you can draw from with no penalty (such as a high interest savings account or a redeemable guaranteed investment certificate) you’ll be able to ride out a crash until the markets have recovered. So, no matter how much your investments drop in value, you won’t be forced to sell them at a loss to keep paying your living expenses.