I've been watching thews and getting your emails and I know it’s been rough for many of you.
Between the shutdown and all these layoffs, many of are seeing that living paycheck to paycheck can completely screw up your lives.
I wish things could get fixed with a snap of a finger, but you and I know there are no instant fixes.
The good news is that there are steps you can take to prepare yourselves now for a rough patch, whether it’s a recession, layoff, or another unexpected event.
Here are five key things to have in place to protect your finances so you have some options should you get hit with
Stash an Emergency Fund (Now!)
Have a solid financial cushion. Even before you start paying off your debts, I suggest having an emergency fund stashed away.
I have several friends who work for the government. A few years ago, they have a couple of paychecks short of what they were supposed to get.
They were told that it would get fixed. Next paycheck. Oh by the way, they get paid once a month.
Yeah, you can imagine how angry and frustrated they were. But here’s the thing – it wasn’t an easy month, but one of my friends could weather that month because she had a stash tucked away.
So if you haven’t already, build up that stash. How much?
That depends on your situation (I actually have a step by step guide on how to get your number here), but the takeaway is your emergency fund is for essential expenses.
It’s to handle emergencies like your car breaking down, unexpected doctor bills, and other surprise events.
Your emergency fund is for your core bills (rent/mortgage, food, car/transportation). After the storm has passed you can add back in the extras, but you need to go lean.
Eliminate Those Credit Cards and High Interest Debts
Kill the high-interest debts. Through the years, I’ve become team #debtfree, but I remember that when I started out it seemed like an impossible dream, especially when my budget was so tight.
If you’re the same boat, I suggest just focusing on knocking out your credit card debts.
Right now, the average credit card interest rate for new offers is 19.24%.
And while you may be able to afford the payments now, each of those cards will suck you dry during a layoff.
Do yourselves a big favor and get on a plan to pay them off as fast as you can.
Take Advantage of Every Advantage
If you have money tucked away and no credit card debts, congrats!
With those off your to-do list, you should use that time to optimize any benefits you now have. What do I mean?
Are you getting that 401(k) match from your employer? That’s free money right there.
It might now seem like much now if you’re just getting started, but it can be a significant amount down the road.
Don't Just Rely on Your Job for Income
Another way you can prepare is by diversifying your income.
Whether it’s earning money occasionally (maybe doing purging your clutter by selling them online) or starting a steady side hustle, that extra income is a handy buffer.
Even if you’re only making an extra $100/month with it, that’s money you can use to build up your cushion or pay down your debts faster.
Create a Better Budget
Depending on your situation, you two are going to have to talk about what budget you need to have to get you to your goals.
If you don't have any money stashed away, PLEASE adjust your budget so you can get that done ASAP.
You can then pull back into a more ‘normal’ budget (or you may discover that living on less isn’t so bad).
Look, you can really get into the nitty-gritty details with optimizing your finances, but if you can set up these 5 things, you’ll be ahead of most people right now.
You Take on Preparing Your Finances
I hope these tips help! If you have any questions please join me over at Thriving Families.
It’s our private Facebook group where we discuss how to win with money and family time.
Sign up for weekly newsletter full of tips, stories, and more to help your family become financially free
Get the best of Simplify & Enjoy in your inbox!