Nobody knows how long things will continue as they have been due to the coronavirus. It could be over in a few weeks or several months, and I think a large portion of the country is watching business after business close realizing they can’t afford to be next. People are afraid they won’t have enough money to get through these uncertain times.
Here is why – 69% of Americans don’t have $1,000 in savings, let alone enough to cover a couple months worth of expenses, and 45% say they have $0 in savings. This was my husband and I several years ago. We were $120,000 in debt and barely making ends meet. Combine that with what is happening now, and this would’ve caused us to panic.
If this is you (or even if it’s not) please continue reading. We will list some steps you can take to put yourself in a better place financially, what we did to get out of a stressful financial situation, and exactly what we’re doing with our money to hedge against what could happen over the weeks and months ahead.
I am not a financial expert. These are things we did that helped us. We know each individual is different and each financial situation unique. If you feel you need more help, we strongly suggest talking with an expert. Below you will find three areas in your life to secure financially and how.
Three areas to cover financially in your life:
#1 Your immediate financial situation:
You will be amazed at how much extra cash you will find by just writing out all of your monthly expenses compared to your monthly income. The first budget we ever did was a huge wake up call. We saw just how much money we were wasting on unnecessary things, and how much we could save if we cut these items from our budget or decreased the amount allocated to them.
When you cut unnecessary spending (cable, Netflix, Hulu, Disney+, etc.) you save money instantly. Entertainment may seem like a necessity but it isn’t, especially during uncertain times. We watch all the shows we enjoy on websites like YouTube, and never need to pay for cable or online streaming services.
Another was eating out. This was wiping out our monthly income. We saw just how much we could save when buying food only at the grocery store. We found ways to further stretch our dollar at the grocery store with and without coupons, you can learn more here. This allowed us to save even more money.
Finally, re-evaluate your bills. Are there ways to decrease the amount you pay monthly for car insurance, cell phone(s), life insurance, etc? Recently our car insurance rates were going up month after month for no reason (no tickets or accidents to justify the rate increase). We called our insurance company and got a quote for similar coverage for a lot less. We are in the process of doing this with our cell phone provider as well.
All of the above will help you build your emergency fund quickly. Typically emergency funds are three to six months of necessary living expenses. Ours is six months, and includes our mortgage, utilities, gas, transportation repairs, car insurance, health insurance, food, needed clothing only, and a small additional buffer for unexpected expenses.
#2 Your ability to make money:
Your emergency fund is going to protect you. Your income is going to keep you going and create the financial future you want. Working hard to show your company you are valuable and indispensable will help in the weeks ahead. Also, learning new skills or trades to increase your value in the workplace is an added bonus.
Increasing your income if you can will help you save even more. Can you pick up more hours at work? Is there another job you can do after work? Or a side business you want to create? It’s almost limitless the amount of opportunities out there for extra cash, even amidst all the panic right now.
If you are already working the maximum hours you physically can, look for things to sell around the house online. I was amazed by the amount of money I could get for my gently used clothes. Something more drastic we did was sell my car. We gained $6,000 in profit (after buying a $3,000 car). This got rid of the remaining debt on the car, gave us a lot of cash to build an emergency fund, and take what was left over to diminish our debt.
If you need extra money ASAP, temporarily stop your investments. This frees up extra cash for the short amount of time needed to save money. However, this is something to do only if you absolutely have to, to survive. Because right now is the best time to buy investments and keep investing if you can while stock prices are low.
#3 Your future financial well being:
Once your immediate situation is covered, your ability to make money secure, then it’s time to start working toward the future. Investing will be your ability to cover your expenses when you no longer want to work or physically can.
Our objective has been to create a passive source of income for both necessary and discretionary spending that will last year after year. This may include ETFs, dividend paying stocks, passive online sources of income, individual stocks, bonds, etc. We are actively researching more companies to invest in and will be buying more stocks. If you’re financially secure in the other two areas we talked about before, now is the time when riches are made in the stock market.
Finally, believe in yourself and take action steps to make it happen. You can do it! We started with a budget and went through each step one after the other and quickly saved $4,000 in two months. The rest of the money (around an additional $4,100) in the examples above went to paying off some of our debt. However, in times of crisis (currently going on with COVID-19) push pause on trying to pay off your debt. Only pay the minimum payments after all of your necessities are paid for first – this would be your food, water, shelter, clothing, transportation, and gas to get to work. This will ensure you are alright in the midst of fear and chaos. Once you start saving money and move to a more secure financial position your anxiety and stress will rapidly decrease. This will give you a clear mind to focus on what needs to be done today and into the future.
Sending you hope and a plan during these uncertain times that will pass.