This strange lockdown we have found ourselves in and the resultant loss or decrease in income has left many people to ponder their financial situation and ways they have been managing their money up until this point. As I mentioned in the previous blogs, some people are just now waking up to the need for setting money aside for times such as this. The idea of the emergency fund has resurfaced into people’s consciousness, and the term is being batted around quite a bit of late. So I thought I would dedicate this space to the topic. First of all, what is an emergency fund, and why do we need one? The general consensus is that we should have about 3-6-months-worth of living expenses put aside, that is there to be used strictly for emergencies only. This money is best kept in an online bank account (slightly better interest rate) and completely separate from your everyday checking/savings accounts. The exact amount in there is up to you. If your income is very variable or otherwise unstable, then the larger amount (6 months) would be advised. Some people prefer to have even more than 6-months-worth if their income is very unstable, or they are very risk averse, or prefer more of a cushion. Everyone, no matter how stable they think their income is, should have at least 3 months at the bare minimum, because no matter how good things are going for you right now, “s#@t” happens! The purpose of having that fund is to keep your finances from being derailed when the unexpected happens. If you have that cushion put aside you can just dip in, pay that medical bill, or home repair or live on it through a job loss and get right back on track where you left off without throwing your whole finances into a tizzy. And even more importantly you won’t be forced to reach into your wallet for the credit card and put yourself into debt over the situation. Someone posed the question to me recently: “How do I determine when to take money out of my emergency fund?.” An excellent question, and that is why I chose to address it in this month’s blog. The bottom line is this, the more you budget for the unexpected, the less you will ever have to dip into your emergency fund. It’s as simple as that. So how do you determine when you really do need to break that piggy bank? Before dipping into the emergency fund you should ask yourself: “Do I really need to use this money right now?” Do you have some time to save up the money that you need, and get by without it for a while. Can you get by without whatever the expenditure is altogether? “Is this something I really need to buy?” Can you borrow something (at least while you save up)? Can you make do without it in some other way? “Is buying this thing right now really necessary?” Maybe it’s not the “need” you think it is, but more of a “want”. “Is this purchase right now really worth the sacrifice it will take to replenish my emergency account?” “If I don’t spend the money right now on this emergency will this situation cost me more money in the long run?” (i.e. a car or house repair that will get worse if left unfixed). In that case, by all means, do it. And after you have dipped into your emergency fund consider if this expense is something you should be adding to your monthly budget so that you are prepared for this type of emergency in the future (I.e. beefing up your “car repair” or “home repair” fund, or adding a new category to cover whatever the expense was). Ideally, if you have budgeted for every possible “unexpected” expense that may come your way, your emergency fund becomes just a big fat luxurious cushion for you to sit on and enjoy the security of. Wouldn’t that be a nice feeling! Wishing you a bright secure future!
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It’s May Flowers month, so I would like to take this month’s blog to look on the brighter side. We began this quarantine journey during the raw March winds when we too were raw and reeling from the shock of what was happening. Many people experienced a job loss or at least a reduction in pay. We could barely wrap our brains around what was happening. All we could do was retreat to our homes, as we were told to do, and try to make sense of it all. We remained hunkered down through the rains of April, for the most part even unable to get outside much in the soggy world out there. As the temperatures plummeted out there so did our investments, and often our spirits. Things looked pretty bleak. All we could do was take stock of where we were financially and in every other way. For those of us who still had jobs it was just a matter of staying afloat and ignoring the stock market plunge (as we are always told to do), and stay the course. For those struggling with income loss it was a matter of prioritizing and taking care of the most pressing needs (shelter and food). The rest would have to be figured out eventually. “But Victoria”, I can hear you saying now, “I thought this was going to be a silver linings message?” Ok, well now it’s May. The month of flowers. We are still home, but the initial shock has worn off a little. Those that have lost income have hopefully figured out a way to get their most important needs met. Maybe they are getting unemployment, SNAP benefits, food from a food bank, their stimulus check, or help from other sources. The rest of us are learning to live at home, creating new routines, keeping ourselves busy and occupied. But the real May flowers are going to be what we take away for having gone through this. For many this time has given us somewhat of a wake-up call. We were hurrying along through life without even thinking about where all our money and time were going. This has given us time to pause, and think, and live a different way, whether we wanted to or not. Many are surprised to see how little they are spending now that they are forced to stay home, unable to go to restaurants, coffee shops, stores, bars, movies, concerts, etc., etc. Some never paid attention to how much all that was really costing them. And some are finding that they actually can lead a pretty good life without all that spending. Perhaps they will rethink it when life returns to normal. So that’s a silver lining. Forced savings helps you discover a different way. Some people were caught short with no savings to help get them through a time of no income. It’s a hard lesson to learn for sure, but a lesson learned nonetheless. In either case being at home gives you the time to step back and examine the way you have been living, where your money has been going and to make some changes moving forward. What was once an abstract notion “I know I should be saving up for an emergency fund” becomes stark reality, and hopefully, brings about positive change for the future. A silver lining! The silver linings go beyond all that though. As usual when we go through tough times, it brings out the goodness in people. Acts of kindness and generosity abound. It is heartwarming to hear the stories of people going above and beyond for their neighbors, friends and people they don’t even know. And staying at home has given us a chance to live at a different pace, to stop all the rushing about and really spend time with each other in ways we rarely do when life is going full tilt. We have been playing board games, making meals and baking together, even just talking and going for long walks together. Some people have reconnected with old hobbies that they never had time for when life was in full swing. Knitting, gardening, painting, playing an instrument... All that is the best silver lining of all as far as I am concerned. If you know me at all, in person or from my writing, you know that I have long championed the slower, simpler, frugal lifestyle that has now become a forced reality for many. I would like to think that some of this will stick, that at least some people will come away from all this with a new perspective. Priorities will shift. People will slow down just a little. Spend more time home with their families and less money on needless frivolities. I think that would be the biggest silver lining of all. A beautiful May flower indeed! Now if only something would come along to force us to reduce our screen time…
Wishing you all a bright and beautiful flowery future! Have you been caught short with a sudden loss of income? Or even a reduction of income, at least temporarily? Times like this can turn your world upside down. Your priorities become putting food on the table and keeping a roof over your head. It’s hard to think beyond that and you may never have experienced anything like this before. It’s hard to believe but not so long ago, historically, this was how most people lived throughout most of their lives on a daily basis. In the 1800’s this was how many people struggled through life. They lived a very frugal existence without even thinking about it. It’s just what they had to do to survive, but then came industrialization and things began to change. People could feel more secure in their daily lives. The Great Depression brought it all back. Food insecurity and the daily scramble just to survive. Frugal living was once again the norm. There have been a few more lean times, WW II, and a few lesser stock market downfalls that have shaken people’s financial worlds… but with no real lasting effect (on people's behavior), and now this... Most people who came through the Great Depression tended to continue to feel that insecurity and lived the rest of their lives in a frugal manner. Their children were raised in that manner, and learned frugality to some extent. But now we have gotten too far away for it to have any real impact on the way we live now, and we all live a much richer lifestyle than those people of yore. So, this coronavirus situation and the financial repercussions has really come as quite a shock, and is leaving many people at a loss as to how to proceed from here. It all depends on your own personal situation. If you still have a paycheck coming in, then the worst of it is psychological, the fear, and stress of dealing with our new upside down world. But if you can stay calm and just hunker down and get through this it will all be ok in the end. If you have investments you have obviously seen them drop, but don’t panic. Sit tight and they will rise again. That is just how the stock market works If you have experienced loss of income and you don’t have an emergency fund, then just concentrate on your most pressing needs at the moment to get through this. You need a roof over your head (and the recent rent/mortgage freeze will take care of that for the time being) and you need food. If you really can’t afford even that then there are charities and agencies to help you with free food right now. And you can apply for food stamps as well (unemployment too). Beyond that don’t worry about your monthly bills. Contact your loan and credit card companies. They all know the situation and will hopefully defer them for now. The same for any medical bills you are paying. Luckily heat season is over, so that's one less thing to worry about. If you can’t pay your electric bill contact the company. Insurance companies must give you a grace period right now as per the CARE act. That takes care of your monthly bills for the time being. When your stimulus check comes in, prioritize it for the best possible use. If you need it to live on, then put it in your checking account and use it for your most dire immediate needs. If you are not going to need the money for your current emergency situation, then it is a good idea to use it to pay down your debt and/or put it aside for an emergency fund if you don’t have one. Put this in a separate bank account that you don’t ordinarily access, such as setting up an account in an online bank. And finally, now that you are stuck at home, if you never want to feel the bottom drop out from you again (financially), it is a good time to re-examine your spending habits. Take a good look at what you have been spending money on. Write down some savings goals. (Hint: one of them should be to save up an emergency fund.) Is your spending keeping you from your future goals? Are you robbing yourself of financial security and a decent future by giving in to reckless, unnecessary spending today? Do you ever want to find yourself in a scary financial situation like this again? Now is the time, while you have the time, to think about what your priorities are and make a budget to reflect them. Now you have time together at home to discuss your goals and dreams for the future with your loved ones. This could be a turning point in your life. Make the most of a bad situation and turn it around to work for you. You can do it! Wishing you all safety and good health! And a bright Future!
There is panic all around us. What should we be doing to keep ourselves and our loved ones safe? How long will this last? What supplies do we need? Do we have enough toilet paper? Sometimes we can be blindsided by what life throws at us. The best way to be prepared for the unexpected is to, well, be prepared. In the case of a new disease coming your way, you are in a much better position to deal with it if you have been living a good healthy life up until that point, eating good fresh whole foods, getting proper rest and exercise, maintaining a healthy weight, etc.. If you have been living this way, chances are you have a much better immune system to fight off the infection. But if you have been eating a poor diet, are out of shape and overweight, leading to possible chronic conditions, can you suddenly start living a healthy lifestyle and expect to have the same healthy immunity as the infection invades your community? Obviously you would have had to been building up that immunity and living a healthy lifestyle for quite some time for it to be effective for you now. I guess you are getting the idea of where this is leading to. The way we live our everyday financial lives also has a big impact on how well we are prepared for whatever life may throw our way. Perhaps this coronavirus has directly (or even indirectly) affected your income. Are you financially prepared to weather the storm? Times like this bring home just how important it is to live below your means (when you have means) and constantly be putting money away for the lean times (or that big “lean time” in your future, otherwise known as retirement). If your ordinary life includes having no debt, having a good emergency fund put aside, and saving on a regular basis, then you are much less likely to feel panic and upheaval when you come to a bump in the road. The more “padding” you have the less you will feel those bumps. Things that are a (financial) crisis to the ill prepared are merely blips to those that have the money to deal with them and move on. If you see the sense in this and would like to shift from a living-on-the-edge (paycheck to paycheck) lifestyle there are many actions that you can begin to take to shift to a saving way of life. If you don’t know where to start I have many blogs on various aspects of money saving strategies that you can implement. Right now, while you are likely sequestered at home, might be the best time to finally sit down and take a good look at your financial situation and take control. Here are just a few that you might find particularly helpful: New Year Savings Resolutions Would You Love to Save More Money? Spring Clean Your Finances Strengthen Your Frugal Muscle, Lighten Your Stress Easy Peasy Savings, Make it Automatic Saving Money Every Day The Perks, Pluses, and Payoffs of Prioritizing My Message to Millennials Ready, Set, Goal! Money Saving Grocery tips from your “Auntie” Victoria And if you scroll through the rest of the blogs, you may find some more that apply to your particular situation and needs. If you need further individual help feel free to contact me at (845) 758-0250, or brightfuture2budgt4.gmail.com for a personal appointment. Wishing you all the best for staying healthy now and moving toward a healthy financial future.
Tis the season …for exuberance, generosity and joyful abandonment. It’s so very festive and fun, but oh so easy to get carried away with it all. And temptations to spend are everywhere you look. Deep discounts! Drastically reduced! Prices slashed! The more you buy the more you save! …. Or do you? It certainly doesn’t seem like it when the bills roll in come January … right around the time when you’re making those New Year’s resolutions, it seems. You know, the ones about getting on a budget and stopping the overspending? So, what are some strategies that you can employ to obtain that simple peaceful holiday season and reign in the excess spending? The first thing you can do is pare down those lists. Of people to buy for, indulgences, activities, and, of course, presents to buy. Well, now is the time to stop and think about that. Take a deep breath, have a cup of tea and sit down and contemplate a quieter, simpler, less hectic holiday season. One that you won’t regret when the new year rolls around. One that you’re not paying for until next August. Does that thought bring you joy? Do you feel your blood pressure dropping already? Sometimes the amount of people we exchange with can become out of hand. What starts out as a nice gesture one year, exchanging with this friend or that relative eventually morphs into a yearly obligation. You may be surprised to find that the other person in this exchange feels the same way and is more than happy to drop the yearly gift swap. Talk to them. Often we also have auxiliary people in our lives to favor with a gift, from teachers to work-related people to babysitters and hairdressers, etc. Many times these people are also swamped with all those many little gifts at holiday time, and though the thought is appreciated they would rather not deal with the deluge. Sometimes a kind and heartfelt note of appreciation is most welcome. If you feel you must give something, make up a big batch of your holiday specialty (cookies, candy, fudge, whatever) and parcel a little out to each of the people in your life that you need to thank. One and done. And edibles are often more appreciated than extra objects to clutter up their lives. Besides paring down the list of people that you exchange with, it is also a good idea to pare down the amount of gifts exchanged. This especially applies our beloved and cherished little offspring. I know it can be so fun to spoil them and see their happy faces when they open that pile of gifts, but is it worth going into debt for? And is it really good for them in the grand scheme of things? ‘
Have you ever noticed that the more gifts children get the less they are actually appreciated? If they open, open, open more and more gifts the presents themselves become secondary to the act of tearing into the innumerable presents. Is this greedy abandonment really the kind of “happiness” you want for your child? Just a few thoughtful gifts might instill a more genuine thankfulness in your child. My last gift giving tip comes too late for this Christmas, but is certainly something you can start for next Christmas. That is to prepare for the holidays all year, both in your spending and your buying. The old fashioned “envelope system” works great here. Just deposit a little bit out of each paycheck and let that be your holiday budget for next year. Pay cash for your presents and other holiday expenses, and when the money’s gone it’s gone. No more spending. And no credit card bills to fret over in January. You can also spread out your buying for the entire year. Look for those after-Christmas sales. Take advantage of clearance sales throughput the year. And one of my favorites, yard sales and thrift shops. I used to pick up gifts for my kids (often still in the box or with tags on) all summer at yard sales and my Christmas shopping was almost done (for dirt cheap) by October except for a few requested items to round out the list. This works especially well with smaller kids who are not as particular as older kids can get. You can sometimes score presents for the adults on your list this way too (keep them in mind when you look around). So, yes, Virginia (or whatever your name is), you can have a joyous holiday season without going into debt for it. In fact, I might venture to say that you can have an even more joyous and peaceful holiday when you keep it simple and take this time to relax and enjoy yourself with your family and friends without all that frenzied spending. Give it a try. You have nothing to lose and lots to gain! Wishing you all a warm and wonderful holiday and a peaceful and prosperous new year! If you are of a normal weight like I am, people will sometimes say to you “Oh, you are so lucky you don’t have to worry about your weight.” Or even more erroneously, “You are so lucky you can eat whatever you want.” Neither of these statements can be further from the truth. In fact, the only reason I am a normal weight is because I do worry about my weight, every day. And I do watch what I eat, every meal. It is just as much a struggle for me as for them. In fact, probably more so, given the fact that I am only 4’10” making every calorie count!
So what does that have to do with money, you ask? Well, I have also had people say to me, "Oh you are lucky that you were able to stay home with your kids and did not have to go out and work." And once again, luck had very little to do with it. Many of the women who said this to me had husbands who were making more money than mine did. These women also had cable TV, big new SUV’s or minivans, new clothes and shoes, maybe a Coach bag, and (back in the day when I had dial-up) high-speed internet. I would wager a bet that they also thought nothing of going out to lunch, buying coffee and drinks out, getting their nails and hair done, and picking up take-out for dinner. And yes, before you start yelling at me, I know there are single moms or other circumstances when women need to work, but my point is that often what people perceive as luck may actually be a result of the many choices made every day in life. Luck can also be a matter of perception in another way. Let’s say you get in a car accident and break your arm. Are you lucky or unlucky? Well, some might say of course you are unlucky! You got into a car accident and broke your arm for goodness sake! How can that be lucky? But then there is the person who says, “I am so lucky that all I got was a broken arm! I am still alive!!” Same scenario. Completely different perspective. So what is luck then? It is a matter of the results of your actions, and a matter of perception. So, the question is can you create your own “luck”? You absolutely can! Let me create a little story for you to illustrate my point even further: Let’s say Dick and Jane make the exact same amount of money. OK, scratch that, since Dick probably makes more. Let’s say Dixie and Jane make the exact same amount of money and through some cosmic fate have the exact same bills and expenditures every month. Each is able to save up exactly $100 per month after everything is paid, giving them each an extra $1,200 per year. At the end of Year One, Dixie takes that money and goes on a much-deserved vacation. Jane puts it in a one-year CD. At the end of Year Two, Dixie needs some new living room furniture, so she spends her $1,000 on that plus $200 on a hot new outfit. Jane now has $2,424 (her yearly savings of $1,200 plus $1,242 in her CD). She puts $2,200 of it into another CD, and spends $30 on a water filter for her tap, so she can stop buying bottled water, and spends $70 on an indoor antenna for her TV and cancels her $110 per month cable service. With the remaining $124 she has a great time at the thrift shop buying a new wardrobe for the coming year. Year Three: Dixie has her usual $1,200 at the end of the year. She splurges on buying herself the latest iPhone, which is just out, plus a nice case for it. Jane now has $2,244 from her CD, plus $350 saved by not buying bottled water, plus $1,320 saved by not paying for cable every month, plus her usual $1,200 for the year. A total of $5144. She spends $800 buying a washer and dryer so that she can stop going to the laundromat. She decides to invest the remaining $4,344 into a low-cost index mutual fund. At the end of Year Four, Dixie has her usual $1,200. Jane has her usual $1,200 plus $350 saved on water, plus $1320 saved on cable, plus $180 saved on laundry. And her mutual fund did pretty well to earn her 8%, so she now has $4,691 in that for a total of $7,741 … I could go on and on, but I hope you are starting to get the picture. One night Dixie meets Jane at a party. When the topic turns to finances, Jane happens to mention that she currently has about $3,000 in her savings account plus a mutual fund with over $4,500. Dixie is impressed and amazed and comments on how “lucky” Jane is to be so far ahead of her, while she, herself struggles living paycheck to paycheck. Does this sound familiar? Is Jane “lucky”? So how about starting to turn your own “luck” around. And one day in the future maybe you will chuckle inwardly when someone at a party tells you how lucky you are to have such a nice healthy nest-egg for your retirement and a nice bright future to look forward to. |
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