How to prepare for changes in your financial situation

Today I offer advice to prepare for and respond to changes in your financial situation, especially for those of you that are receiving less income from not working, being laid off, or furloughed.

Look ahead – Often in life, we experience challenging times. To get through those tough times we need to believe that it is temporary and we can work through the current situation. Create new goals for the short and long term. Keep in mind to create SMART (Specific, Measurable, Achievable, Realistic, and Time-Oriented) goals.
Assess – If you don’t have a spending plan, it is time to create one. You need to know what money you have coming in and what is going out.
- First, let’s look at income. If the amount you receive has already or will change, you need to know how it will impact you. If you are furloughed, how will that reduce your income? If you are laid off, how much will you receive in unemployment income? If you are not sure, ask others for help.
- Secondly, start tracking where you are spending money. This does not only include bills you pay, but other things such as: eating out, grabbing coffee, or any other habits you may have. The Consumer Financial Protection Bureau (CFPB) has some great resources to assist in tracking money. Once you know where the money goes, you can readjust.
Automatic Deductions – Over time, we set up a number of deductions from either our paycheck or bank account. Be sure to reassess those deductions. You may need to stop donating to a charity for a short time or reduce your contributions to your retirement account. These changes can be temporary.
Side Hustle – There may be an opportunity to make money on the side. Use this time to de-clutter and have a yard sale. If you have a hobby, try to make some money with your skillset. Look for a part-time job. Look around your neighborhood; there may be some small task that you can assist your neighbor with and make some extra money.
Bills – There are some strategies when you get behind on bills. Create a bill calendar, this will give you an idea of when your bills are due. In some cases, you can call the company and request the due date be changed. Getting your bills to coincide when you get paid can help. Sometimes you can negotiate new terms on your debt. Companies would rather be paid something rather than nothing. At times you may need to prioritize your bills by taking care of your needs first and your secured debt. The Behind on bills? publication by the CFPB can assist you.
Government Programs – There are several programs to help get through these difficult times. There are programs that assist with rent payments, pause mortgage payments, reduce student loan payments, etc. The CFPB has some resources available. It may take some effort, but the assistance is out there. Don’t forget about your local charities as well.
Savings – This may be a time to tap into your savings to cover short term needs. Just remember that you need to make adjustments to your spending, as this money is not a permanent solution. And don’t forget that when this is over, you need to rebuild this reserve for the next emergency.