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Staying financially smart while staying home

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“We have bills to pay! We cannot afford to take a salary cut,” a client relayed. She is not alone.  With the world changing there is a lot of fear and uncertainty. What to do when financial fear increases your stress level? We all want the quick fix.  There is none.

Do Not: 

  • Stop contributing to your retirement plan at work.  Most people who stop, never start again. If anything, reduce it.  Even to ten dollars a paycheck.  
  • Cancel your health insurance.  In today’s unprecedented pandemic, need I say more?
  • Take everything out of your retirement plan. There are other investment options besides the stock market within your company’s plan, it is a  requirement by law.  
  • Listen to the turbulent investment news and act on it each day.

One of the smartest ways to spend a bit of your time during this stay home period is to organize your finances.  Many folks are often too busy to get into the details of their financial life with the daily commute, family routines, and job pressures.  Though this is a stressful time, understanding where your money goes will help you feel more in control. Not to mention it has been proven time and time again when people are organized around their money, they are more apt to watch it grow.  

The following exercise was critical in her and her husband making proactive decisions when money became an issue for them in the recent crisis.  This involves managing your money by prioritizing and seeing in black and white where your money goes.

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Manage your Money today with less effort and a better outcome:

  1. Find a time when you can focus.  Perhaps the children are napping or it’s early and you are the only one up.  Too early to video call or chat with a friend? This is the perfect time when you can give forty minutes to an hour of uninterrupted time.  Getting financially organized is not difficult, it just needs a bit of concentrated effort.
  2. Look at your checkbook statement and review the auto pays.  What is coming out of your checkbook every month without you having to even click a button?  The rent? Your Spotify payment? Car Insurance? Write each one down, preferably with a good old pen and paper.  Be sure to include the dollar amount. 
  3. Find your credit card statement.  Do the same and see what you charge automatically each month.  
  4. Sort through these expenses in order of priority.  For example, most everyone has the mandatory expenses of housing and car insurance.  Discretionary expenses consist of groceries and clothing. The truly optional ones are like gifts, subscriptions, charitable donations and investing.
  5. Decide the best way to pay them.  Writing a check may be old fashioned but works for you or click and pay each month may work best.  Automatic may be easy but unconscious. These “bills” may get in your head like they did my client.  She had no structure to evaluate them.    

Here are some thoughts to consider on how to decide if there is a better way to pay these without using convenience to overshadow financial sense.  

  • Most insurances charge a bit extra for billing you monthly.  In a time when every bit helps, paying twice or even once a year could add up to saving you money.
  • At this time, supporting our charities is especially important. This should be a conscious decision each time you give and support the causes you believe in.  With autopay, the charity is actually receiving less than if you gave that ten dollars by check or cash. They are paying credit card fees.  A better way to support them is to make an annual gift.  
  • If you are like many families, you found subscriptions were automatic were a large part of those expenses.  And perhaps there was some overlap – NetFlix and Amazon Prime? GooglePlay and AppleMusic? Streamline to save money.

The true bills you have to pay are for housing, utilities, and food.   Beyond that, choices we make are based on our income and quality of life desires.  We need to know what we are paying so we can adjust accordingly.   

If you are switching some auto pays to an annual payment, open a Savings account.  Yes, you can open savings accounts at this time. You add up the amount you will be paying your car insurance, charitable donations, Amazon Prime membership and YouTube for the year.  Then, allocate that to go monthly into the account. You may even want to use a bit of the upcoming federal government’s distribution to bolster that account or pay now the annual amounts. 

After going through this exercise, my clients decided they could indeed take a pay cut.  They had to make some spending and automatic billing changes. They committed to charge less on their credit cards.  Having the numbers clearly in front of them created an element of grounded decision making rather than an emotional reaction. 

CD Moriarty, CFP is a financial speaker and writer who wants to create financial peace of mind for others. Today she is happy as she stays home in Vermont on the edge of the beautiful Green Mountain National Forest.  She can be reached through her website at MoneyPeace.com.