So many people feel stressed about money, but that doesn’t have to be your family. Don’t let your doubt, fears, or stress stop you from reaching your financial goals. Push through! This is especially hard right now when many of us have felt a more than a little derailed during the pandemic.
My Dad used to tell us the story of the five little frogs sitting on a log. Four decide to jump off the log – how many are left? I would say one. He would say no actually there are still five. Just because you made a decision to jump off the log does not mean you took action. As we move towards the fall it is time to make game changing decisions. You have the capacity to make tough choices and the ability to make the right decision. Are you ready to take massive action?
Action gets you off the log. We have been through a game changing time so now as we take stock and sit on the log we get to decide. What do you want to happen next? You are ready – do you want to sit there and think about the decision or are you ready to jump and take massive action and make some changes.
If you’re looking for financial security in your life, jump off the log and try these eight game changing steps:
- Reassess your current situation.
When this crisis began, you might have gone into “survival mode”. Focusing on taking care of the four walls—that’s food, utilities, shelter and transportation—and nothing else. You canceled your Netflix account. Told the credit card companies to wait their turn. And called off that vacation you had on the books for months.
Are you still out of work, or feel like your income isn’t very stable? Then you might need to stick with the Four Walls for a little longer. At least until you can get your income situation sorted out.
But if you still have your job (or got a new one). Feel like you’re in a secure situation, it might be time to start attacking your financial goals again. Whether that’s getting out of debt or saving for a down payment on a house.
It was tough, but you did what you had to do! And now as the quarantine winds down, it’s time to take a step back and look at your current situation with a fresh pair of eyes. That way, you can make decisions that make sense for your situation!
Are you still out of work, or feel like your income isn’t very stable? Then you might need to stick with the Four Walls for a little longer—at least until you can get your income situation sorted out.
But if you still have your job (or got a new one) and feel like you’re in a secure situation, it might be time to start attacking your financial goals again—whether that’s getting out of debt or saving for a down payment on a house.
Bottom line:
- Make sure your income is stable. You may have changed jobs and that’s fine—as long as you have a steady paycheck and things are stable.
- Remember, facts trump fear. Take a deep breath and see if the facts are on your side.
- Before you emerge from financial quarantine, make sure you’re caught up on your bills and debts so you’re not adding interest charges and penalties.
- Revisit your monthly budget.
There’s no denying it: It’s been a weird few months. And if you were stuck at home during quarantine, your budget probably felt really out of whack.
Working from your living room with nowhere else to go, you probably went weeks without having to fill up on gas. On the flip side, you probably spent more on toilet paper and hand sanitizer in the last two months than you have in your entire life!
Now as things slowly shift back to “normal,” whatever that looks like, you might need to start adjusting your budget back to where it was pre-coronavirus as you start driving more and getting back into the swing of things.
But maybe this quarantine has helped you realize that some things shouldn’t go back to normal. Maybe all those zucchini bread recipes you baked during the quarantine have inspired you to avoid eating out as much as you did before. And those free workout videos on YouTube and walks around the neighborhood helped you feel the burn without the gym membership burning a hole in your budget.
The point is that you have a chance to pick and choose what comes back into your monthly budget and what stays out—don’t waste it!
- Get back on the Baby Steps.
No matter where you were on the Baby Steps when things shut down, you probably needed some time to pause as you navigated through life in the land of COVID-19.
If you’ve been chomping at the bit to get back to attacking your debt snowball with gazelle intensity or resume saving for retirement now might be the time to get on it—especially if you still have your job and feel like your income is stable:
If you’re on Baby Steps 1–2:
Once you have at least $1,000 saved up, get that debt snowball rolling again so you can attack your debts as fast as you can. Having debt lying around will leave you financially vulnerable if another crisis or emergency hits, so get it out of your life once and for all.
If you’re on Baby Step 3:
With millions of Americans losing their jobs or getting furloughed, many folks had to dip into their emergency funds to keep things going. If you’re back at work and have a steady income, it’s time to get that emergency fund back up to 3–6 months’ worth of expenses.
If you’re on Baby Steps 4–7:
Whenever you see a storm coming—whether it’s an impending job loss or a global crisis—it makes sense to pause contributions to your 401(k) and IRA, deposits to the kids’ college funds or making extra payments on the house. That way, you can pile up a little more cash for the essentials. But now that the clouds are starting to break, you might feel comfortable picking up where you left off.
And if you’ve kept the money from your stimulus check in a holding pattern within your bank account, you might feel comfortable enough to throw that money at whatever Baby Step you’re on!
- Say good-bye to Credit Cards.
Imagine waking up tomorrow owing exactly $0 to a credit card company? That can totally be you one day . . . if you cut up your credit cards today.
The biggest argument I hear for keeping credit cards is the rewards. Oh, people love their credit card points. From cash back to airline miles and “free hotel nights”, manipulative credit card companies have done a great job drilling this concept into our minds.
But I’ve never met a wealthy person who told me, “The secret to my success is all in the credit card points.” Credit cards are not the way to financial security. In fact, they’ll take you in the opposite direction.
Think about all the extra money you’re spending to “earn” those airline miles. A buy now, pay later mentality causes people to spend more than they would with their own hard-earned cash. And that’s even before the interest kicks in.
You know what else you can book flights and hotels with other than credit card points? Actual money in your own checking account. The only thing you earn with a credit card is a lot of debt, stress, and worry. The random perks, airline miles and free pizzas the credit card company throws your way aren’t worth paying crazy amounts on interest and putting your financial stability at risk.
- Build up an emergency fund.
Nothing will give you peace of mind and financial stability like an emergency fund. An emergency fund will be your safety net when emergencies happen—and life will happen. It’s hard to become financially stable if you keep going into debt because of emergencies, so putting some money in the bank is the first step to financial security.
Too many people reach for their credit card when their car breaks down. But all that does is turn a car problem into a money problem. Then, compound interest turns the money problem into more and more debt, stress and worry. However, when you have actual money in the bank just for emergencies, you can simply get the car fixed. No stress. No drama.
It can be difficult at times to build this up, but if you make it a priority, it will happen.
Begin with the starter emergency fund of $1,000. This will cover smaller emergencies while you’re getting out of debt. Once you’re out of debt, take your emergency fund up to a full three to six months of expenses.
Nothing will give you peace of mind and financial stability like an emergency fund. An emergency fund will be your safety net when emergencies happen—and life will happen. It’s hard to become financially stable if you keep going into debt because of emergencies. Putting some money in the bank is the first step to financial security.
Too many people reach for their credit card when their car breaks down. All that does is turn a car problem into a money problem. Then, compound interest turns the money problem into more and more debt, stress and worry. However, when you have actual money in the bank just for emergencies, you can simply get the car fixed. No stress. No drama.
It can be difficult at times to build this up, but if you make it a priority, it will happen.
- Attack your debt.
Cue the confetti because this is an exciting part of your journey toward financial security!
Your number one wealth-building tool is your income, but debt is a thief and steals your income. And on top of that, making all those payments is annoying. So, it’s time to eliminate debt for good.
The best way to get out of debt is to use what we call the debt snowball. Here’s how it works:
- List out all your debts, except your house, from smallest to largest—by balance, not interest rate. This includes your student loans there is no “good” debt. It all must go.
- Pay off the smallest debt first while paying the minimum payments on everything else. You have to get mad at this debt! This is your I have had it moment. Take as much money as you can and throw it at the smallest debt on the list.
- Once that is paid off, take what you were paying on that one and roll it to the second smallest debt. And so on until you’re debt free! The momentum of this will help you stay motivated and be intentional.
This is the most effective way to pay off debt because it addresses the real problem.
Money isn’t all about math and interest rates—it’s also about your behavior. So, by paying off the smallest debt first, you get a quick win. And we all love that, don’t we? Even if it’s a $300 debt on a department store credit card, put it on the list and pay it off. When you’re done with that debt, cross it off the list and move on to the next one.
Quick wins help you stay motivated throughout this process. They get you ready for the challenge of paying off bigger debts. And once you’re debt-free . . . well, that leads to true financial security.
- Live on less than you make.
If you want to attain financial security, you need to take advantage of your greatest wealth-building tool: your income. So, whether you’re trying to find money to build up your emergency fund, pay down debt, or invest in your future, your paycheck is the best place to start.
What can you do to maximize your take-home pay? Spend less of it!
Instant gratification will get you into trouble time and time again. If you can learn to tell yourself no and be content with what you have, you’ll be more financially stable than you’ve ever been before. No more overdraft fees. No more living paycheck to paycheck. No more spending money you don’t have to impress people you don’t even like.
Remember that making minor sacrifices now will pay off in the long run. This is only for a season. Know what your end goal is, and then go after it!
Your budget categories should include savings and sinking funds. You still plan out every dollar and give it a name you just live on less.
- Invest 15% of your income after you’re out of consumer debt.
A huge piece of financial security is knowing you’ll be taken care of in retirement. For you, that might mean retiring early to pursue your dream business idea or being able to travel.
After you dig yourself out of debt (except for your mortgage). Have three to six months of expenses saved in your emergency fund. Your family will be in a great spot good spot in life, right? Zero payments and a sweet safety net will have you feeling more financially stable by the day.
Once you’ve built that strong financial foundation, it’s time to start investing 15% into retirement.
Here are the four places I recommend you invest:
- Roth IRA
- 401(k) plans
- 403(b) plans
- IRAs
There are a million rules and details when it comes to investing. It is important to work with an investment professional you trust. This person should explain to you, in terms you understand, how these investments work.
If you’re curious about how much you’ll need to retire comfortably, try reading investing expert Chris Hogan’s Retire Inspired Book. And his Retire Inspired Quotient tool.
All My Best,
Don’t just decide – take massive Action.
Jennifer Parker