Raise your hand, if you or someone you know have ever became unemployed or under-employed unexpectedly!
Raise your hand, if you or someone you know have ever had an unexpected expense throw a wrench in your financial game plan!
Raise your hand, if you or someone you know have ever struggled with making ends meet.
My hand stayed up the whole time. What about you? Can you relate to or recall the
amount of stress that the above situations caused that person? It's tough. Finances are the number one cause of stress in the U.S according to a study done by Northwestern Mutual. I can imagine that being true even under normal conditions.
So, what happens when our finances take a turn for the worst? I once read an article that stated, "40% of Americans can't afford a $400 emergency" on Forbes. Let's say a car breaks down, hours get cut at work, your loved one's health declines...so many situations that can cost hundreds and even thousands of dollars. What do you do?
Although each of those situations will require a different course of action, there are some steps and tips that can apply across the board. Here is what I would suggest to make your money go further in hard times:
1. Reduce Unnecessary or Flexible Expenses
If you've been following previous posts, you know that budgets are a MUST for EVERYONE. You need to be telling your money where to go, rather than trying to chase it down. So, first things first, you need to take a second (or third) look at your budget. In this step, I want you to look at your 30% (see my IG post on the 50/30/20 rule here).
This is the time for your to crack down on your unnecessary and "fun" expenses such as: subscription services, dine-out budget, beauty regimen expenses, "going-out" expenses, etc.
Next, you need to take a look at the expenses that are flexible and can be reduced such as: cell phone plan, food budget, gas expenses, sinking fund allocations, investment/saving contributions, etc. You should look at any and all expenses and see how/if they can be halted temporarily, minimized, or completely cut out.
Yes, I included your sinking funds and S & I, but I DO NOT mean to dig into them at this point! I just want you to minimize the amount of cash that you contribute to them for the time being (unless you are getting a matching contribution). We will talk more about saving and investing later. If you don't know what a sinking fund is click here.
2. Reduce the Necessary Expenses
Now, I know what you may be thinking..."but, Geli! It says NECESSARY?!"
I know. However, some of these necessary expenses may still be reduced (or cut depending on how serious the situation is). If this financial hardship is going to be long-term, it may be time to make some serious changes.
You need to figure out how you can reduce your living expenses. Maybe your lease is coming up and you can move-in with a loved one? Maybe you can move to a cheaper area?
Now some of these are very hard for me to suggest to anyone, but I'd rather you take these measures than default on anything or dig a deeper pit for yourself...Consider doing some of the following:
-Reduce your monthly debt payments to the mandatory minimums.
-Start ride sharing to reduce transportation costs.
-Save on tuition by taking time off, until you can afford it. Don't take on more student debt. D:
-Consider consolidating your debt to reduce the total monthly payments you owe.
Remember, #2 from my first blog post? Contact your bill collectors and service providers and share your hardship. You'd be surprised how many organizations are willing to work with you.
3. Increase or Re-evaluate Income
Focus. Here is the time where you really need to look under every rock and crevice. What opportunity can you find to make more money?
-Do you have a hobby or skill that you haven't yet monetized (i.r graphic design, beauty services, jewelry making, landscaping, painting, etc.) ?
-Do you have space in your home that you can rent out?
-Do you have the extra hours to work a new job or side hustle(i.e telemarketing, Uber, tutor, etc.)?
-Do you have un/underutilized items sitting around the house that you could sell?
I really want you to take some time with this and write down your options. There is money out here waiting to be made. You just need to be ready to research and hustle.
This is also the time where I want you to research all of the assistance available to you. So many people miss out on benefits and programs that were designed to assist all of us tax payers during hardship. Reach out to your local social services and non-profit/government organizations. Research online as well and see what other people have used or know of.
4. Re-evaluate Current Funds Available
This is also going to be hard to share. Realize that I am sharing this last, because I want it to be the absolute last resort. My only intentions for sharing it is to prevent you from becoming victim to predatory lending or falling into a rabbit hole of unmanageable debt..
Before I get to that, I want you to look at your short-term savings. That's easy. THIS situation is why you have been responsible enough to put money away. However, I want you to only touch your savings after you've exhausted all the above options!
Unfortunately, there might be a time when you need to look into your long-term savings, equity, and debt options. Proceed with caution.
Please, realize that withdrawing early from long-term accounts (IRAs, CDs, etc.) will COST you. There can be some hefty penalties and tax costs for doing so.
If you own property, there may also be equity available to you. Realize that tapping into this equity is borrowing against that property and defaulting on that debt can be catastrophic.
Finally, you may decide to look into using credit cards or loans to cover the gaps. Please, do your research. Know your terms: interest rate, late fees, credit amounts, early pay-off penalties, minimum payments, loan terms (i.e 3 years), balloon payments, etc. If you don't understand what something is, ask. Don't wait for your lack of knowledge to bite you in the booty later.
I want you to really proceed to my last suggestions with extreme caution. Please, consider getting expert advice from a professional. There should be free services to help you in your community. If not, paying for professional advice may still cost you less than making an uninformed decision.
FHF will be offering free counseling sessions soon, so stay tuned for that. The best way to keep up-to-date is to join the family by subscribing to the site. If you want to reach out in the meantime, please don't hesitate to do so! :)
If you have any more tips that you think apply to this blog, please share them in the comments! You never know who it can help. Also, if this was of any value to you, please share it with your loved ones. Tough times aren't selective of the person. We can all benefit from a better financial situation.