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Dealing With Financial Hardship

Updated: May 22, 2020

Most of the world is dealing with an unexpected financial crisis. Companies, factories, restaurants, and schools have all closed their doors due to COVID-19.


So what can you do? How can you handle this current situation, and be better prepared for whatever happens next?


Everyone will deal with financial setbacks, economic downturns, job loss, and a long list of other troubles. But the good news is, these unavoidable circumstances don't need to ruin your entire life. There are simple and doable things you can do to prevent a crisis from throwing completely off track.


We'll go over some helpful tips that you can start today to save money, and have enough to pay your bills, as well as how you can prepare for your future.


What Can You Do Right Now?

If you have found yourself in a difficult situation, it's not the end of the world. You can take action today and begin your journey to a great financial future. You may have unexpectedly lost your job, as so many have, or found yourself with unexpected bills piling up.


You're not alone in this situation. According to this Economic Well Being Report from the federal reserve, 20% of people had an unexpected medical expense in the past year, and 39% of adults in the U.S. aren't properly prepared to deal with an unexpected expense of $400.


If you’ve found yourself in a situation that seems impossible, don’t worry. I’ve found that worrying about the worst case scenario doesn’t help much. Here are a few options you can do today to save money, and get some extra cash quickly when you need it the most.

  1. Cancel Unneeded Subscriptions- The $5.99 per month, or $14.99 a month may not seem like much, but when you have five or six subscriptions, it quickly adds up. You may even have subscriptions that you aren't aware of. A report from Waterstone Management Group shows that 84% of people underestimate their monthly subscription spending, the average being $237.33. Plus, when you decide to cancel a subscription, you may get an offer for a free month or future discount.

  2. Sell Some Stuff- The average person has hundreds, if not thousands of dollars sitting around in their house. And today, there are plenty of online marketplaces to sell your stuff. Spend a few hours going through your garage, attic, and closet and collect unneeded things in good condition. This can include clothes, books, sports equipment, tools, old electronics, and the list goes on! You can list items for local sale on Facebook Marketplace, OfferUp, LetGo, and Craigslist. Or you can head to eBay, and Poshmark to sell your stuff around the world. I don’t recommend garage sales because everything is sold for much less than it’s actually worth.

  3. Reach Out To Your Friends- No one is able to help you if they don't know you need it. Posting on social media can be humbling, but it can also lead to some great opportunities. People that you're connected with online can be the key that opens the door to a new job, or some weekend work to help pay your bills.


What Can You Do To Prepare for Next Time?

After dealing with your immediate needs, it's necessary to prepare for the future. It's almost guaranteed that you will experience more than one financial crisis. But when you're prepared, a crisis will be easier to handle.


The main key to successful financial preparation is consistency. Every time you get paid, deposit a set amount into your designated savings account. This needs to be done before the end of your pay period, or else it's likely won’t happen.


When an unexpected bill comes up, and you have money readily available to cover it you won’t need to worry.


How Much Should You Save?

Many financial experts suggest starting with an emergency fund that can pay for a full month of bills. This money can be used in the case of a sudden job loss, accident, medical expenses, or anything else that comes up.


Your next step is to build your emergency funds up to three months of expenses. And ideally, you will work to build up 6 months of expenses in a savings account. That might sound intimidating, or impossible if you have no savings, and you're running behind on bills. But remember you are preparing for the long term. These strategies aren't necessarily designed to help your immediate needs, but rather prepare you for the future.


Where Should You Keep Your Emergency Fund Money?

The good news is you have a ton of different options. That can also create a challenge when you're deciding what's best. There are pros and cons to each option, so decide what you're comfortable with.

  1. Your Regular Bank- This is the simple and easy option. If you don't have a savings account set up already, it only takes a few minutes. The interest rate for a regular savings account is .07% APY, which isn't much at all, but it's still free money. Before opening a savings account, check to see if there is a monthly fee or minimum balance.

  2. Online bank- The next simplest option is an online bank. Online banks don't have any physical locations, everything is done on an app or website. This allows the bank to pay you a higher interest rate- around 1.70% APY. Ensure your online bank is insured by the FDIC, but pretty much every bank is online, so your money will be safe.

  3. Investment Apps- This option offers a bigger risk and reward. There are a few different apps, like Acorns, Stash, and Robinhood, which can allow you to invest right from your phone. Investment apps allow you to invest in a variety of stocks and bonds, and your money can be taken out within a few days if you need it, unlike an IRA which charges penalty fees for early withdrawals. These can offer much higher returns (5-7%) but the market goes up and down, so you run the risk of losing some money if you need it in a hurry or during a recession.

  4. Save Cash- If you’re a visual person, this may be your best option. Get a jar or shoebox and write “Emergency Fund” on it. Then start putting some cash in it every week. This is a great idea if you usually carry and spend cash. When you get home put your spare change and smaller bills in your savings. You won’t earn any interest, but it can be a great visual to watch your savings increase over time.


Creating A Budget

I know some people reading this just cringed or rolled their eyes. Everyone knows they need to budget, but it’s often overcomplicated and no fun! But I've found that my money seems to have a mind of its own, meaning if I don't tell it where to go it disappears. All of my bills get paid, but then there’s nothing left over.


If that sounds like your story, listen up. Your budget doesn’t need to be a complicated formula or an Excel spreadsheet with a thousand rows and columns. Let’s break down creating a budget in a few simple steps, and you’ll be on your way to financial success.


  1. Print Your Bank Statements- Login to your bank’s website and print out the statements from the past two months. You need to see what you’re actually spending money on, so if you use credit cards or more than one account, print out everything. And FYI, the amount you spend on food will surprise you!

  2. Write Down Categories- After the shock of what you’ve spent goes away, put your spending into a few categories. Rent/Mortgage, Utilities, Car Payments, Insurance, Student Loans, Groceries, Personal Care. Put the average monthly spending next to each category, add them up and get your total monthly spending.

  3. Save 10%- If you don’t have 10% of your income left over after expenses, find ways to cut down your spending. Instead of spending $300 on eating out, spend $250. Or cancel one of your $9.99 subscriptions that you weren’t aware of. If you can’t find any way to save 10%, start with 5%, and remember consistency is key. It would be better to actually save 1% than say you’ll save 10% and never do it.


Budgeting Tools

Today, there are a lot of resources that can help you get started with your budget. You can connect apps to your bank account and have everything available at a glance on your smartphone. Do a quick google search, try out some of the popular and trustworthy apps, and choose your favorite. You will be surprised how much insight this gives into your spending and saving habits.


It is still important to print out and review your bank statements, because it provides you with a great visual, and adds some shocking inspiration to spend less on what you don’t need.


There's no single, unified, budgeting method that works for everyone. But the most difficult part is getting started, so make it a priority. Everyone knows they should have a budget, but it can be intimidating, and a bit embarrassing to face your spending habits.

No one likes to admit that they aren’t making the best financial decisions, and we all should’ve started budgeting and saving years ago. But the great news is you can start today. Then in six months, you will be so grateful that you just started. The constant worry about an unexpected bill will disappear because of the choices you made today.


Preparing before the storm hits is one of the wisest things you can do. And you will thank yourself when you’re not scrambling around trying to hold things together in the midst of a calamity.


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