This post is sponsored by Alliant Credit Union, Insured by NCUA, but all opinions expressed are solely my own.
About five years ago I was about to make one of the craziest decisions I’ve ever made: leave my stable teaching career to blog full time.
I felt so strongly about quitting my job.
One of the reasons I was convinced I could safely do it was because I had been making some major changes in my financial life that would help me through the upcoming uncertainty.
I got serious about budgeting, decided to destroy my debt, refused to take on any new debt, and found new ways to make money.
That was my plan, and you know what? It worked.
Now, there’s no one-size-fits-all plan or magic pill that you can take to ease all of your stress or fear when you’re facing a major life change like switching careers, a job loss, or an unstable economy. But there are steps you can take to make it a little easier, and that’s exactly what I want to share with you today.
4 money moves that will help you prepare for financial uncertainty
1. Know where you stand with your money
Do you know how much you spend on groceries every month? Your cell phone bill? What about how much you make each month after taxes? What about debt?
Don’t be too hard on yourself if you don’t know those answers – a lot of people don’t.
But the thing is, if you want to make a solid plan for yourself, you have to know exactly what’s happening with your money: how much is coming in each month and how much is going out.
The best way to do that is to start tracking your money by starting a budget.
Start by keeping track of exactly how much money you make each month. This is after taxes or any other contributions (health savings plan, retirement savings, etc.) are taken out. You want to know how much you have left to spend.
At the same time, track what you’re spending throughout the month, including:
- Fixed expenses like mortgage/rent, cell phone, cable bill, internet, health insurance, car payment, debt payments, etc.
- Variable expenses like groceries, some utilities, clothes, medical care, etc.
- Don’t forget extras: dining out, entertainment, fun money, etc. This is a mistake I see a lot of people make. They’ll go ultra-frugal when tracking their money, but that’s unrealistic if you’re not living that way regularly. You want an accurate, honest picture of your finances.
Speaking of your budget, after you spend about a month keeping track of everything, you can sit down and create a realistic budget for yourself. The goal is to spend less than you make.
If you’re worried about losing your job or taking a pay cut, try to create a budget that focuses on eliminating extra expenses and saving as much money as possible. Go through everything you tracked and see what you can lower or get rid of entirely.
Here are a few examples:
- Cut cable and switch to a less expensive streaming service.
- Call your car insurance company and see if there are ways to lower your rates. I was able to reduce my rates by $40/month the last time I tried this.
- Find a less expensive cell phone carrier.
- Go through your subscription services and see what you don’t really need.
Depending on what your situation is, you can even draft an emergency budget. This is a super lean budget where you only spend money on your needs. If you don’t need to use that budget, awesome, but you’re prepared if something really serious happens.
2. Get your debt under control
Debt is a liability, and if you’ve struggled with it, then you know exactly what I mean.
Here are the two best things you can do to start taking control of your debt: don’t add to it and focus on destroying it.
Even things like financing a new cell phone, taking advantage of low interest rates to buy a new car, or just choosing to use your credit card to order takeout can set up a dangerous situation if you’re uncertain about the future.
Rely on your budget to tell you how much you can afford to spend and how much you’re spending each month on debt repayments already.
High-interest rate consumer debt, think credit cards, is some of the first debt you should focus on paying off. This debt can snowball if you’re only able to make the minimum payments for a while.
When you’re in an emergency, you should also know if any financial protections come with your debt. For example, federal student loan borrowers can set up income-driven payment plans based on your income and family size. Deferments are another possibility if you really can’t afford to make your student loan payment for a short period.
3. Save, save, save
Saving money in an emergency fund does exactly what it sounds like: you have money set aside for unexpected expenses. You saw this happen at the start of the COVID-19 crisis – Americans started saving a record high rate, 33% because they were concerned about what might happen over the next few months.
Being unable to live like we normally did (travel, go out to eat, etc.) and the stimulus checks made it possible for more people to save, but the point is the same: saving money protects your future.
Having an emergency fund can help pay the bills if your hours are cut or if you lose your job. It also protects you from adding to your debt because you’ll have cash set aside for moments when you might rely on a credit to cover unexpected expenses. For example: you need to fund an emergency car repair, or the water heater goes out.
The more you have saved the better, but honestly, any amount offers some protection.
You can build weekly or monthly savings goals into your budget and save it in one of Alliant Credit Union’s high-yield savings accounts. The rates are 7x higher than the national average and there are no minimum balance fees.
Alliant Credit Union has also been rated as one of the Best Online Banks of 2020 by NerdWallet and Best Credit Union by GoBankingRates.
4. Learn how to make extra money
Cutting expenses only go so far, especially if you’re already cut made cuts to your budget, or have a lot of debt. It’s also hard to save extra money if you’re trying to quickly pay down your debt.
Finding new ways to make money is how everything comes together, and you can use your budget to figure out how much extra money you need to make and how to allocate towards your expenses.
Non-traditional jobs and flexible side hustles are some of the best ways to make more money right now, and there are a surprising number of options:
- Food delivery drivers are currently in high demand. You can pick your hours and earn upwards of $20/hour.
- There are options to rent out your car when you’re not using it.
- You can leverage some of your existing skills – writing, proofreading, web development, graphic design, etc. – and start a freelancing side hustle.
- You can sell your stuff online or flip things you find at garage sales or thrift stores.
- Take online surveys – these only pay $1-$3/hour on average, but every little bit helps.
- I ran Facebook ads for small business owners to supplement my income after I quit my teaching job, and this is still an in-demand skill that you can learn.
- Let your money make more money in high-rate savings or checking account.
Those are honestly just a few of the legitimate options available right now. What makes side hustles so appealing is that they’re flexible enough for you to work more than one at a time. In addition to running Facebook ads, I was also managing websites and doing email campaigns.
The final word on preparing for financial uncertainty
Listen, it’s easy to let fear get the best of you when you don’t know where things are headed. I spent several years after my site took off living with a scarcity mindset because I never wanted to be in that situation again.
Getting your finances in order can take time and discipline, but any steps you can take in advance will help you through tough situations.
Lean on what’s available, like Alliant Credit Union’s high-rate checking and savings accounts to create a plan that works for you.