The reality is, money plays an integral part in our daily lives. You can’t ignore it, you can’t pretend it isn’t important, you can’t run from it, or tell yourself you won't let it take precedence over this or that. If you want to take part in this society, you have to understand all things money. If you don’t, you will simply be trapped in a spiral of debt, poverty, or just making it by. You will be controlled by money. So many find themselves in this situation currently. There is no denying that wallets are stressed. Record level inflation figures have not settled, pushing Americans to the brink. We are in an economic crisis. In this article, I will detail the steps you can take to either maintain or become financially stable during times like these.
But first, I want to give you some figures. Just recently, the Federal Reserve Bank of New York released a report showing an increase in total household debt in the first quarter of 2023. American households carry a total of $17 trillion in debt- a record high. But I bet you are wondering how that breaks down per family. The average household debt is $101,915 as of the end of 2022. Mortgage, auto loan, personal loan, and credit card debt are all up from 2020 figures. So, you aren’t alone. It truly is a crisis. Do you want to know the difference between you and them? You have made the decision to educate yourself. Or, maybe you are just a little bit curious. Either way, both are good.
There are six main points to keep in mind when on this journey.
I. Create or pad your emergency fund
You should aim to have at least six month’s worth of expenses saved for emergencies. However, if you are just starting out, aim for $1,000, or a month’s worth of expenses. Adjust your goals as you hit the milestones. During times of economic crisis, job security is not necessarily secure. You see more lay offs, even from seemingly large and powerful companies. Make sure you have these funds secured separately from your everyday spending and never touch it unless you have an emergency.
II. Review your budget
III. Pare down your expenses
Grab some statements and write down your expenses. This is part of the budgeting process, so you should already have this! Cancel those unnecessary expenses. It may also be helpful to use a Weekly Spending Tracker Worksheet if you find you are overspending consistently. I understanding making the decision to cut out certain expenses can be difficult and personal, but keep in mind your ultimate financial goal. Then ask yourself the question, "is it worth it?"
IV. Stay invested
You may be tempted to sell those investments when the market falls, but hit pause. Markets have historically been resilient. Cashing out has historically meant missing out. Keep in mind, though, investing should not be on your to do list yet if you have not yet funded your emergency fund or if you aren’t willing to take the long term approach to investing. If you are looking to invest, be sure to look for quality companies with good balance sheets and avoid speculation.
V. Increase income
Consider a side hustle. Sometimes it just comes down to the need for more income. Don’t despair. There are a ton of ways to make extra money. Here are just a few: sell items, drive for Uber or food delivery companies, market research, sell something on Etsy, or even freelance.
VI. Stay focused on your financial plan
You want to revisit your plan often and make adjustments as your situation changes. Revisiting your plan, or goals, will keep you motivated and in the proper mindset.
If you are worried about the current economic crisis, it is best to reflect on the six main points I have made in this article. It won’t be easy, but the financial stability you reach will be a reward worth reaching for.
Follow me on instagram @onmoneywithlaurabaize to get more money tips. My goal is to help you build financial confidence and wealth.