Key financial strategies are timeless.
Figuring out how to manage your money is hard enough in normal times.
It’s downright wonky when something as challenging as a global pandemic comes along.
Sticking to a budget, paying down debt, and saving for the future are challenges everyone faces, no matter whether
your income is $30,000 or $300,000 (although it’s hard to imagine having trouble with budgeting when you’re earning $300,000, right? But trust me, we have several clients in this
The pandemic has reinforced four key financial strategies that I live by to this day:
1. The importance of having an emergency fund. Personal finance experts have been preaching for years the importance of a fully-funded emergency fund to prepare for the unexpected. During the pandemic, we saw four in ten visitors to food banks were there for the first time. One of the little talked about consequences of the pandemic has been the tightening of credit standards, meaning it’s become harder to borrow money.
According to the Federal Reserve, we’ve seen a significant rise in people being rejected for loans, going up from the norm of 14.2% to over 18%, which equates to a 27% increase overall. So for people who didn’t have an emergency fund because they reasoned they’d just borrow money if they ever needed to, the pandemic may have given them a reality check.
To get started establishing an emergency fund, make sure you establish a separate account just for this fund.
We recommend having this account at a different bank than your regular checking or savings account so that you aren’t tempted to easily transfer money to pay for ‘non-emergency’ needs.
2. The importance of having a budget or rather, a Spending and Savings plan. When we say the word ‘budget’, we often feel deprived or restricted. From a mindset standpoint, a budget seems like a lot of hard work and something that we dread.
But what if we simply had an accurate idea of all our fixed and variable expenses each month? What if we put money aside each month for the annual expenses that come up every year so that we actually had money to pay for them instead of sticking them on a credit card and adding more debt?
That’s what a Spending and Savings plan is! With our Spending and Savings plan tool, you’ll spend less than 30 minutes a month managing your money because the only category you have to review is your variable expenses.
3. The importance of living below your means. Some of you are probably saying to yourselves right about now…. “I know! I know!” and others of your might be saying “I’m already living so frugally, I don’t know where I could cut more out of my budget.”
There are some ‘sneaky’ expenses that you may not even realize you could reduce without too much pain or inconvenience.
One of the quickest and easiest expenses to review are your subscriptions. I don’t mean magazine subscriptions but things like Stitch Fix, Hello Fresh, Netflix and Hulu and Birchbox. These subscription services are fun and convenient but the average American spends $237 a month on subscription services ranging from music streaming services to workout apps to book services like Audible.
By canceling these subscriptions and simply purchasing items as needed, the average American will save a ton of money.
4. The importance of having multiple income streams. When the pandemic hit, we saw a huge rise in the side-hustle or part-time gig. Suddenly, these were lifelines to many families as we saw jobs disappear. No industry is immune to change anymore so no matter how secure you feel in your job, never get too comfy.
Having a hobby that you could turn into a business if you need to, or some marketable skill that you could do on a freelance basis is an important aspect of protecting yourself from a downturn in the economy or an event like this pandemic.
We often think that life will be linear in fashion. We think we’ll progress from point A to point B and then to point C. But the reality of life is that it’s rarely this way.
Life is more like a giant roller coaster and the best we can do is buckle up!