Control or Chaos?
Due to the recent Coronavirus outbreak, many companies have encouraged non-essential workers to stay at home in order to help stop the spread of the coronavirus. Unfortunately some companies have had to lay off some workers in order to mitigate the cost of the potential loss of business. For many of you, this may be your reality and in this uncertain time of confusion and unsteady income, it is okay to feel like you are helpless.
But you aren’t. There are many steps you can take in order to feel secure with your current financial status no matter what stage you are at. I have listed 7 steps below, choose the ones that are right for you. You can control your money by setting up an emergency budget. When you know your numbers it can give you peace of mind. Even if your income hasn’t been impacted, your numbers in your budget should be adjusted. These days my shopping and entertainment have decreased while my grocery bill has increased.
#1 Build Money Awareness- The first thing you must do is to make a list of all upcoming bills and their due dates. Look at your accounts to find this information. Your checking account and credit card statements can reveal what activity has been happening. I suggest looking back as far as 6 months or even a year. There are many expenses that don’t occur on a monthly basis.
#2 Shortage of cash funds, start researching what your lenders can do for you during this
time. First , go to each company’s websites to see what kind of plans they are putting into place to help those in financial need. Next, call each company and explain to them your situation and what choices you can make in order to either reduce payment or delay payment. Remember to ask about the consequences of changing your plan!!! This is very important!!! But always always try to find a plan at a reduced price that will still fit your necessities, for example, because you will be at home for most of the quarantine, you will most likely need access to the internet, call the company to review your plan. I was able to receive a $35 reduction with my internet and cable company and increased my internet bandwidth.
Another cost saving idea is to go through your pantry and put together all of the food that you can eat. Make a weekly plan on what kind of meals that you can make using the items in your pantry. Not only will this help in minimizing the cost of groceries, it will also reduce your exposure to the public, social distancing is key.
Consider making changes to your cell phone plan, if you currently have an unlimited data plan with your phone company, you may want to switch to a less costly limited data plan.
Now would also be a good time to review your policy with your insurance companies to ensure that you are getting the best current rate. Let them know that you have reduced your miles driven.
#3 Look carefully at your entertainment expenses. Go through all of your subscriptions including streaming and online video game services and determine what services you use the most. Cancel everything you determine to be underused and cancel services that you can live without. Do you really need Disney+? Why pay for your child’s PlayStation Plus when they already own Minecraft for PC? This is also a great opportunity to check up on your free trials you used a few months ago and see if they have charged you without you being aware of these charges. Your FREE trial may be costing you money. The point here is to downsize, not elimination! It is important to have a few splurges to keep you motivated to stick to your plan. Make sure you have something to entertain yourself as we have no idea how long our new routines will be in place!
#4 Set up your emergency budget. Take your list of due dates for each of your bills and their costs. Put them in order. Then check your account balances and your emergency fund and see how much money you have to work with. It is time to use your emergency fund that you have created to insert deposits to cover your expenses. We will call this budget the ‘Forecast Budget’. It provides a road map for your upcoming weeks. Create a spreadsheet, (Or use pencil+paper if need be!) List your starting cash with your current account balances and any money you would like to take out of the emergency funds. Then go through week by week determining the amount owed to each company, this is the time to make minimum payments. It doesn’t make sense to pay extra on an account only then to experience a layoff or furlough and then need those funds. Once we get through this you can kick start your goal to pay down your debt.
Go through the pattern of listing your available cash and subtracting all of the bills that need to be paid during week one, and at the start of next week, list the leftover cash from the previous week and add any new additional income, subtract all the bills that need to be paid for that week, continue to do this for each week.
Once you have your spreadsheet all set up, go through it again and see if you can reduce your costs. If you have gone into the negative one week, go through your previous weeks and see if you can reduce the cash spent for those weeks, keeping your additional expenses in mind and when you will receive that. Remember to keep your four walls (Housing, Utility, Food and Transportation) intact while you are going through your expenses a second time. If you’re having trouble figuring what to get rid of, prioritize and assess your risks. Do you need to take your dog to the groomers this week or can it wait? Do you have enough gas to get to the grocery store?
Because of all of the changes that are going on in the world, the emergency budget may fluctuate, and that is okay. Make changes each week. This is a living document. Make changes as life is happening.
#5 You may need to use your emergency funds. It is okay to use these funds if you have to! You have been saving for this! Don’t worry, you can recover from this! Think of it like a loan to yourself.
#6 If you do not have an emergency fund, you will be tempted to use a credit card but you still need to know your minimum monthly obligation by setting up your budget. It’s easy to overdo it with a credit card. Remember that all research shows that people increase spending by 20-25% when using a credit vs. cash. It is common to rack up $45,000 in debt over a couple of months when in reality the monthly obligation is closer to $5000 a month. Please, be careful here. You want to avoid coming out of this in deep debt.
#7 Once you are finished setting up your ‘Forecast Budget’ take a deep breath! You have finally gained control in chaos! Still worried, reach out to me with your questions by scheduling a 30 minute Q&A. Take care of yourself!