Advice by Regina Harris, Kentucky National Guard Personal Financial Counselor
FRANKFORT, Ky. -- Are you wondering what will I do? Where will I go from here? With the state of the economy, sequestration and furlough and so many other things going on, so much uncertainty is very scary. We only know that we will have our paychecks cut! Take heart, with only this much information, we
can take steps to
help ourselves deal with financial change.
What must I do, you ask? We must reduce expenses and save as much money as possible. That is very easy to say, but very difficult to do. The rationale is that "When the sky is falling, you take shelter." The saved money is your "shelter." If you like the "Rain falling, use an umbrella" analogy, go with that. Either way, the goal is to be able to pay essential expenses
without borrowing any money or creating any debt. There is just no way to sugar coat what is to come. It’s time to put on your Big Girl/Boy pants.
Here is the First step:
1. Write down absolutely everything (make two $ columns) on which you spend money like…
- Fixed expenses (mortgage, rent, car payment…)
- Variable expenses (cell phone, electricity, cable…)
- Other expenses (pet care, gym fees…)
- Contributions to Retirement, Investments and Savings
2. Total the dollars amounts on this first list, column
A,
Now that you have all these numbers in front of you, have a heart to heart talk with your family (any person who uses/relies on your income). The talk needs to assess what is most important and essential to the family. Put a check mark next to each item on the list that is essential to keep. Copy that essential items dollar amount into column
B, which should be next to column
A. Good hints for the check mark are the mortgage/rent, utilities, car payments and savings accounts.
Here is the second step of what to do:
- Calm Down and Grow Up! Flashback, “…very easy to say, but very difficult to do.” This is it.
- Stop contributing to retirement accounts.
- Stop contributing money to everything, except simple (withdraw without penalty) savings accounts.
- Stop all extracurricular activities for the kids and you. I know, as I said this is Big Girl/Boy stuff!
- Stop loaning money to family and friends.
- Try to reduce every item on the list that is almost essential, example cell phones, pet fees, etc.
- Delete any item that is really just a want, example cable TV, hobby fees, etc.
- Explore the option of selling things that you no longer need/use, example sports equipment, books, etc.
- Lastly, explore extra income. Be careful to check with your command first, though.
Total the amounts on this second list
B. Then subtract:
A –
B =
C.
C is the amount you have trimmed for re-routing and saving.
That was the last list. In all reality the money saved is really money not spent. The money will be re-routed to the essential items. Any extra money should be put in Savings, to use when there is a short- fall to pay the essential items. As your income settles and you know what to expect, you may be able to step back a bit. When it seems safe, add back in some of the comforts you may have had to give up for a while.
The third and and final step: It is vitally important to keep a very tight
Budget /Spending Plan.
It is times such as these when the ‘fully funded emergency fund’ shines. Its only purpose is to help us when our regular income falls short. When this emergency is settled, please consider saving 4 – 6 months of expenses.
For more information email Regina at
RHarris@MFLC.Zeiders.com or give her a call at 502-548-4836. You’ll be glad you did!