Stop panicking and get your finances under control
Lately all we hear about in the news is how dire the state of the economy is. Unemployment is soaring, job losses are reaching new heights daily, and large corporations are going belly up. Even with the assistance of the “Economic stimulus package”, it will take an extreme amount of time before we are able to reap the benefits of this program. Let’s face it, it’s up to us as individuals to take a stand and become in charge of our own financial destinies. We can no longer sit back and place blame all around us. Sure, some things are out of our control, such as the goings on behind the corporate board room doors, or even the high level decisions that impact the financial status of any company. What I mean is that within our own households, we can control our actions. So much so that any outside interferences are minimized.
For instance, one of the number one rules of personal financial management is to save at least 6 to 8 months of living expenses in an emergency fund. With the current level of job losses reported each month, now is the time to be able to tap into that emergency fund. The truth is that the majority of us are about 2 paychecks away from poverty. So what happened to that emergency fund? I’ll tell you, nothing. Nothing was saved or even considered, because the typical mentality is to spend now and worry about emergencies later. Well I’m here to tell you that emergencies do come, and when they do, they come harder than expected. I guess you could call this the ultimate procrastination. We wait until the last minute or until the problem spirals out of control. What’s happening in the economy is a revelation to us all. The economy has been managed like our own households; spending lavishly on goods and services that have no permanent value in our lives. We enjoy the momentum of wealth as long as we don’t have to be held accountable for its origins. Our habits must change in order to make a difference. Don’t get me wrong, I am just as sympathetic with the next person about the financial challenges many households are facing. However, I do realize that even with our limited resources, we can still make a difference by changing our spending habits. Create that emergency fund now. Every little bit counts. Even If you’re receiving unemployment, take some of the funds and put aside in a separate account for future use. Most importantly, don’t touch those funds. Treat it the same as when you borrow from a retirement fund. Pay yourself back an additional 10% for borrowing funds from the account.
What I’ve decided to do is summarize five of the most popular financial suggestions that many of us are familiar with. It helps to see these suggestions repeated, because repetition brings about a change in habit.
1. Pull all your financial skeletons out of the closet. All those past due accounts, turn off notices, judgments, etc. Next, create a spreadsheet of all your expenses separating them into categories such as household, vacation, education, etc. Compare this to your income to determine your status. From this create your budget and stick to it.
2. As I mentioned earlier, put away 6-8 months of your earnings into a savings account to build your emergency fund. Do not invest this money into risky ventures like the stock market. This money should be immediately available to you at no cost.
3. Live below your means. If you’re a two earner income family, get into the habit of living entirely on one contributors income. I know, it sounds a bit outrageous to pull this off, but you’ll be surprised when you realize that the majority of your purchases are “wants” and not “needs”.
4. Find unique ways to save money. For instance if you have cable TV consider canceling the service and signing up for Netflix. You can save about $50-$100 per month.
5. Get started today. Procrastination doesn’t serve any of us at this point.
Taking care of your financial profile is your responsibility. Not the government, not your employer, not your financial adviser, it’s yours. Take back your life and create a new financial future!
Partnering for your financial future
Jacqueline E. Williams
Financial Strategist
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