As we can see over the past month, we are in unprecedented times. Yes, there was the influenza outbreak of 1918, but never has there been a time where both people and information have been more mobile, let alone during a pandemic. With the population’s health at risk, the stock markets in flux and many industries, businesses and therefore, jobs seeing daily losses, it is truly a time of turmoil unlike the entire world has ever seen. Unemployment claims in the US hit a new record as they spiked to 3.3 million. Prior to this, only 1.7 million people were even in the program, but enough terrifying talk. We are all aware that these are scary times. The question is, what are you going to do to better your financial situation both right now and in the future?
If you are one of the 3.3 million unemployment claims, then this is even more crucial of a time than for the rest of us, who may be adapting to new work situations. What helps is having different levels of security to help protect you and your family in these trying times. They say to never put all of your eggs in one basket and that applies not just wealth and investments etc, but also in terms of your expenses, income and savings. Assuming that working full time in a job that you enjoy and making a decent living is plan A, let’s call all of these additional of security your backup plans.
Living on One Income- Not Just in a Pandemic
With our upcoming plans to go from being a double income household with no kids to a single income household with kids, we’ve been practicing living on just one income for quite some time now. This helped us to pay off all of our consumer debts, buy our first rental property, save up our emergency fund and start saving for fertility treatments. My wife makes substantially less than I do because society is wrong in valuing being a nanny so much less than being an engineer. However, with this in mind, we try to keep our normal monthly expenses under her after tax income. We usually go just over that amount, but not by much.
In good times, this keeps us moving forward at full speed towards our goals. Before all of this hit, we had plans to travel this summer and then starting our journey towards being kick ass parents. In bad times like this, it makes me confident that even if I lost my job, bringing home over 50% of our income, we would still be okay. However, what about if that does happen?
Flexibility is Your Best Friend
On the Expenses Side
Many of us have the amazing fortune to not be living near the poverty line and to have built in luxuries into our daily lives and budgets. I mentioned before that if I lost my job, we would instantly lose over 50% of our income. We keep our monthly expenses around my wife’s income so that we could still live our day to day being relatively normal. However, if this happened, we would cut some extraneous expenses to help us still be able to save a little in that case. Some of the things that we would cut are:
- Subscriptions to Netflix, Scribd and Spotify
- Dining Out (We do this once or twice per month, but in a pinch we would drop this in favor of Date Nights In)
- Sinking Fund Contributions for: Clothing, Travel and Gifts
*Note that we would keep our sinking funds for home and car maintenance, as well as for our pets*
Overall, there is a difference of a few hundred dollars between our normal monthly budget and our minimum monthly budget. This few hundred dollars would be needed to go towards beefing up our emergency savings for things like medical insurance and expenses that currently comes directly out of my paycheck.
If you are able, try to keep budgeting for expenses like home and car maintenance as these are line items that will not go away and will only get more expensive if left untended. I realize that this may not be something that all can keep up with due to some dire circumstances, but if you are able to still do things like this, then do it.
On the Income Side
On top of cutting back our more “luxurious” expenses in an emergency situation, we would then work to leverage the income side of the equation as well. In today’s current climate, it may be more difficult to sell some of your belongings or go out and find a job (or second job), but there are still options to earn income from home that could be leveraged. Using us as an example, if I were to lose my full time job and had difficulties finding a new job in that career, I would double down on my activities for this financial coaching business and as a Krav Maga instructor. These two side hustles are my passions and I would use the opportunity to dive into expanding what I love in order to better our financial situation.
Now this one may seem obvious, but I didn’t start with it since not everyone has an emergency fund and many live paycheck to paycheck. If that is the case for you, the very first thing that I want you to know is that just because you did not have an emergency fund does not mean that you failed in any way shape or form. I’ve seen a lot of very negative things about personal responsibility lately and not only are they unhelpful, but they’re wrong. If you are in this situation currently, I will be posting a lot more content directly for you very soon, but here is my general advice at this time: Do what you need to do to make ends meet now, whether that is relying on the stimulus package that is coming your way, going to a food back, taking out a 0% interest credit card to front your necessary expenses or maybe all three plus more. These times are tough and once the world is able to right itself back on its axis, it will be time to re-evaluate. At that time, the number one priority for everyone needs to be to build that emergency fund.
The number one thing that you can do to protect yourself from a personal crisis or, in this case, a global crisis that has had personal effects of millions if not billions of people all at once, is to have an emergency fund. Specifically, an emergency fund that is earmarked for an absolute emergency and not one that also includes items like home and car maintenance. This is what sinking funds bring to your financial portfolio. Setting aside the funds for the expected random expenses allows you to leave your emergency funds for true emergencies… like COVID-19.
If setting up your sinking funds and emergency funds seems absolutely daunting right now, just save everything in one place for now. Even if you’re only able to contribute $5 at a time, do it. Every spare cent should go into this account until you have enough in there to cover at least one month’s worth of expenses (Forget the $1,000 Dave Ramsey rule. It’s not enough.) From there, expand out to those sinking funds in order to preserve your newly saved emergency fund.
Wrap It Up!
In times like these having levels of financial security you can build for yourself is even more crucial. In this coming Monday’s post, I will be talking about the various sources that are available to you now should you need them. This is just the beginning of a much needed conversation. Take these ideas on how to build up your levels of security and if you are able to do these things now, go forth. You will sleep better at night knowing that you are protected against something like this pandemic ever happening again and drastically improve your relationship with money in the process.
If you are not able to build your levels of financial security due to the current situation, then let’s talk. As one way that I can contribute to those who need help right now, I am offering my financial coaching services at steeply discounted rates. Please reach out to my through my contact page or set up a quick audit with me and I will coordinate with you on what we can build together.
What levels of financial security have you built? Conversely, what struggles are you having in the current climate? Let me know in the comments below!