The simple life can sound idealistic, but when you are suddenly forced to live on less, things can get complicated real fast.
Whether it be a temporary setback or permanent lifestyle adjustment, you will get through this.
After taking a few deep breaths, here are your next immediate steps.
Take an honest look at your bank statement.
Review your goals, assets, income, expenses and debt. Now take a good hard look at the previous month’s expenses and bucket your spending into two categories: the need-to-haves and the nice-to-haves.
The need-to-haves include necessities such as housing, food, transportation, and insurance.
Nice-to-haves may fall into the above descriptions – think dining out, which can fall under “food” or a car service that could technically be considered “transportation.” The differentiator between a need-to-have and a nice-to-have is that the latter can be sacrificed for the time being. In other words, you can give up your thrice-weekly trip to the local sandwich shop, but you should not reduce your grocery bill so much so that you are skipping entire meals.
Also keep in mind that your needs may likely differ from those of your spouse, friends and coworkers. While one might require a car to get to and from the office each day, you may be able to commute using public transportation, a bike or your very own two legs. Only you can determine what is truly a need versus a nicety.
Track your spending.
Once you’ve distinguished between the need-to-haves and nice-to-haves, keep tabs on your spending habits. It’s one thing to know what you’re spending your hard-earned money on, but it’s an entirely different level of awareness to know how often you are making unnecessary purchases. Get into the habit of reviewing both your outgoing and incoming streams of revenue once a week. Record your findings in a spreadsheet so that you can find patterns to when, where or with whom you tend to overspend.
Look for alternate opportunities to earn extra money.
If you find you still need to make more money to cover your basic expenses, consider an alternate source of income. A quick way to scrape up extra cash is by selling assets – think clothes, furniture or exercise equipment in a garage sale, or unloading stock or securities. If you are able, you could work part-time or weekends at a second job. Or, turn your talents into a side hustle. Just don’t forget about additional taxes or licenses required as an independent contractor or gig worker.
You also could borrow money from a friend or family member, or dip into your retirement account or cash value life insurance plan. Be wary of these last options, as these arrangements could have damaging long-term consequences.
Apply for every loan option that comes across your inbox.
Payday loans, credit card cash advances and other lines of credit may seem like great ways to access money fast, but these short-term solutions can have high hidden interest rates ranging from 30% to 300%! What’s worse, if you borrow from the equity of your home or exchange the title of your car for money – as in the case of a home equity loan or car note loan – you could end up losing these valuable “need-to-haves” if you are unable to make the required repayments on time.
Neglect your credit card payments.
Credit card debt can be a heavy burden to bear even in the best of financial times. If you find yourself suffocating under the weight of credit card bills, consider contacting your creditors and having an honest conversation about your current circumstances. You may be able to avoid late payment fees or renegotiate your interest rate, especially if you’ve been a good customer.
Go at it alone.
During prolonged periods of stress, supporting mental health is especially important. Reach out to loved ones for emotional support, or seek out others who have gone through a similar setback to gain guidance on the way ahead. Your local credit union can provide financial products and services for when the unexpected happens. They also can connect you with resources to serve your best interests.
Most importantly, be thankful for what you have.
The best things in life oftentimes are free – take this time to reassess your priorities and take stock in all the positives in your life. Then, take action to protect these valuables by creating a plan to achieve a stable, and successful, financial future.