Finances in a Time of Crisis (From the Archive)
I originally published this blog article in 2020 when a lot of people were struggling with the ramifications of governments telling people who could and couldn’t work. That may not be a current problem but there are still many people who are struggling to make ends meet each month. If you’re one of those people, I’ve revived the tips below for you.
What do you have, and what do you owe?
The place to start is taking an inventory. Make a list of all the money you have access to. This includes your checking account, savings accounts, cash under the mattress, and the coin jar for Disney. Don’t include your investments or money you could borrow, such as credit cards. If things get really bad, you can consider the investments later, but going into debt – or further into debt – won’t make things any easier later.
Next, determine what expenses you typically have to pay for. List them all. Include the mortgage/rent, utilities, groceries, kids’ soccer balls, Netflix, etc. After, you’ll sort them in order of importance, so it might be helpful to put them on little squares of paper or sticky notes. Do your best to estimate how much each expense will be for a week and a month.
List your expenses in order of importance
Now’s the time to sort your expenses in order of importance. I agree with Dave Ramsey, who says you should take care of your “four walls” first: (1) food, (2) shelter, (3) utilities, (4) transportation. These are the expenses you have to cover in order to survive. After those four are put at the top, sort the rest of your list in order of importance. If you’re having trouble, just look at one at a time. For example, let’s pretend this is what you have so far and you’re trying to figure out where your child’s sports fees fit in:
Groceries
Rent
Electric
Gas
Student loan
Vacation
Ask yourself if the sports fees are more important than your student loan payment. If the answer is yes, then you’ll put it between gas and student loan. If the answer is no, then move on to the next one and ask if the sports fees are more important than vacation. If the answer is yes, then you’ll put it between student loan and vacation. If the answer is no, then you’ll put it at the end. You can repeat this question and answer process for each item on your expenses list. (This is why having separate squares of paper or sticky notes is helpful so you can easily reorder the list.)
Figure out how far down the list you can get
Use the amount of money you “found” when you searched around for spare change and run down the list to see how far you can get. When the money runs out, you either have to not pay the rest of the list or find some more money. We’ll cover that in a moment.
See if you can reduce the expenses
There’s a three-prong approach you should use here.
First, see if there is anything you can cut out completely. You may have to ask yourself the tough questions here. Can you cut Netflix? Can your kids take a season off from league sports? Do you really need three cars or can you make it with two (or one!)?
Second, see if you can reduce the expenses you can’t cut. Call around to different insurance carriers to see if you can reduce your home and auto insurance. Contact your credit card companies and ask if they’ll reduce your interest rates. Call your internet provider (or their competition - if there is any) to ask about a rate reduction or a cheaper plan. Same for cell phone service. You may need to speak to their cancellation departments and threaten to cancel in order to get a reduction.
Third, inquire about temporary deferment of payments or payment plans. Will any of your lenders let you skip a payment? Can you set up a payment plan for your utilities or spread them evenly over the year?
(NOTE: You’ll want to be careful about this one. It’s one thing to skip a payment if they are going to move it to the end of a loan, but you could get into trouble if the lender requires all deferred payments to ,be made in a lump sum at the end of the deferred period. For instance, your mortgage company might let you defer your $1200 mortgage payment for 90 days but at the end of that period, require that you produce the entire $3600. If you’re still struggling in 90 days then you might not be able to make that payment.)
Make some [more] money
I bet you have some things around your house that you don’t need, at least not now. Selling unwanted or unused items is a way you can get an influx of cash quickly. In times of crisis, you might need to consider selling things that you know you’ll want to have/use again someday but that are not necessary to survive. Consider a patio set, for example. You might sit outside often and really enjoy it. It’s not, however, necessary. Selling that patio set might mean being able to pay the electric bill for another month. When your financial situation improves you can look for a nice used set to replace the one you had to sell, and possibly help out someone who is then going through what you’re going through now.
Take an inventory of your skills and experience, brush up your resume and start applying for any position you can find. Think outside the box and consider work at places such as a grocery store. That might provide not only some extra income but also a discount on groceries to lower your expenses. While it’s true that many businesses have cut back, there are still lots of places that are thriving and hiring.
Investigate support programs
Last, but not least, look into what government and community support programs are available. Here’s a list of some possibilities to explore:
Supplemental nutrition assistance (aka “food stamps” or “SNAP”)
Free or reduced healthcare
Food banks
Utility assistance programs
Government-provided phones
Childcare assistance programs
Full or partial unemployment
This isn’t an exhaustive list, but it’s a good place to start.
Times might be tough, but there are steps you can take now to improve the situation. There are things you can control and ways that you can move to a more stable financial position. Try the steps I’ve suggested here and you might find that knowing what you have and what you’re spending, and taking concrete action to improve things, will make you feel like you’re in control and not just a victim to the crisis.
