by Kevin Ree
Have you had to cut back on spending or make different choices with finances over the last few months?
Whether by choice or by circumstance, now is the time to put together a budget plan or fine-tune the one you have in case an economic recession is on the way. But how prepared should you be? Three months of living expenses is generally a good safety net, but that’s during normal times, this is hardly that. It’s a personal question to answer, but resetting your financial habits and mindset towards “savings equals safety” will help get you there.
Begin With the “Here Today, Gone Tomorrow” Approach to Financial Uncertainty
Begin with the here today, gone tomorrow approach to financial uncertainty. This is the thinking that every dollar you bring in today could be gone tomorrow as needed to cover loss of income through layoffs, cut hours, reduced business, medical expenses, and even loans to loved ones. The income you have now needs to be able to stretch should money become scarcer. Putting extra value on each dollar in your budget is critical, but the follow-through is crucial. Look at every expense as a need versus want face off and try to cut back on or remove the wants. Even doing this for a little while until you see a clearer financial path ahead, will help save for emergencies, ease stress and boost confidence. This effort done now will get you back to a clear path sooner, which includes adding your wants back into your spending.
As stores, restaurants and our favorite businesses reopen, you’ll likely start seeing tempting sales and deals as a way for owners to drum up money to help recoup losses from their closures. I know for me, these sales are as tempting as scratching an itch (No face touching!), but every time I walk away from a bargain, I have a little win in my wallet and a huge win for my reassurance that I’ll be better off should I face near future financial hardship. This also applies to planned events like vacations, weddings, and gifts. Can things be put off and paid for later? Is this spending the best for you and your family’s greater financial good? During the unknown, money saved holds a higher value than money spent.
So, to finish this post up, I highly recommend testing out a tighter budget for a minimum of 30 days and see how much excess spending you were able to cut and then reflect on how you feel about the savings. Does it help calm some financial what ifs? Can you carry this out for another month? Should you?
Take the time now to ease the burden of later. At least financially speaking.