Whether it is our current pandemic and social unrest, a medical condition or a career change, a change in income can be stressful. Being smart with your money during a good economy is important to ease a potential financial burden during uncertain times.
According to Forbes Magazine 49% of Americans expect to live paycheck to paycheck each month in 2020 and 53% say that they do not have an emergency fund that covers at least three months of expenses. That is a terrifying statistic! But Never fear! There are ways to stretch your income during good and bad times.
Developing a positive mindset
Does it cause you stress or anxiety to think about your money? Just knowing that this is common may help redirect you to a “can do” mode. You might be wondering how to go about making changes to the way you think about, or interact with, your money. The website Mint.com has some good tips about this to help one make better financial decisions. The past has passed. Choices today will direct tomorrow.
Where does one begin? I have found that just reviewing three months of bank data can be eye opening to actual cash flow. Total your monthly deposits, and categorize the expenses with pencil and paper, or with your favorite spreadsheet or accounting software. Based on those actual numbers, you now have the start of a bare bones budget that includes necessary monthly expenses like rent/mortgage, property tax, utilities, insurance, and vehicle payments; and variable expenses like food/toiletries, personal care, and entertainment. The income remaining after covering necessary (non-discretionary) monthly expenses is discretionary income meaning you control how to allocate towards variable expenses, entertainment, and savings.
Need help filling out your bare bones budget? Here are some of our suggestions: QuickBooks has a built-in feature, Every Dollar, Family Budget Calculator, and Excel Template.
Sometimes a budget may seem too tight for one’s comfort. A positive next step ought to include shopping for best prices, temporarily reducing/eliminating expenses that are more want than need, and/or reviewing options for additional income.
Tune in tomorrow for Part 2 of this always timely topic (especially now) outlining some concrete steps on allocating one’s new budget normal.
By the way, we are available to help if needed and offer 1-Hour no obligation consultations. Contact us today to make an appointment.