It is across every headline and it’s changing the way we operate on a daily basis. No one could have predicted the impact Coronavirus has on not only the United States, but the entire world. Markets are crippling everywhere, industries are shutting down, and many people are without paychecks and we are right in the middle of this pandemic.
It is without a doubt something many of us have never experienced before in our lifetime. The Coronavirus pandemic has affected everyone in some way or another. At a time with such uncertainty, it is more crucial than ever to lock down your finances and stay focused on your end goal.
Getting your finances in order during a difficult time may seem harder than it looks. However, even on a modest salary (or no salary), one can truly make a difference following simple financing strategies and being consistent month after month.
Tip #1: Track your Spending
Without a doubt, the easiest and one the most effective ways to improve your finances is to track your spending. How can you budget and save money if you don’t know where your money is going?
Don’t over complicate this step. There are many apps and web-based spending trackers, however, I recommend using a pen and paper or a spreadsheet. Over the past two years, I have been tracking every expense with a spreadsheet and it has worked better than anything else. I’ve tried companies like Mint, but have found more success with this spreadsheet:
Make it simple and you are far more likely to keep at it over the long run.
TIP #2: Build a BUDGET
After tracking your spending, it is now time to build a budget. While analyzing your spending habits, patterns will start to form, and you will start to notice opportunities to save money. A good rule of thumb when first creating a budget is the 50-30-20 plan. This budgeting plan was Popularized by Elizabeth Warren in her book, “All Your Worth,” this budget breaks down 100% of your income (after-tax income) into the three categories:
- Things you need: 50%
- Things you want: 30%
- Savings: 20%
This budgeting tool is very effective because it is simple. It is easy to separate your expenses into these three categories and you are more likely to keep it up over time because of this. Take your expense tracking data and break it down into these three categories. From there you can start to tweak it and make adjustments to get more in line with this budget.
**Pro Tip: To maximize your financial stability, consider cutting back from the things you want and plowing more into your savings (investments, etc.). You can still do the things you want and go out to eat every once in a while, just be more disciplined when it comes to paying yourself first. If you put 40% of your income into savings before the things you want, it forces you to only spend 10% on the things you want. Over time this will significantly impact your overall wealth.
Tip #3: Keep Paying Down Debt and Eliminate High Interest Debt
Continuing to pay down debt is crucial in order to keep your personal finances strong. Tell yourself, “Falling behind on my payments is not an option!”. You need to be very adamant about this and disciplined in order to continue paying down debt in tough times. Focus on these four simple payoff strategies:
- Debt snowball: This is where you focus on paying off your smallest debts first, while continuing to pay the minimums on the others. As you pay off each debt, roll the amount you had been paying into the next lowest debt amount. Over time this creates a “snowball” effect, allowing you to pay off your largest debt quicker.
- Debt Avalanche: Focus on paying debt off with the highest interest rate, while still paying minimums on others. Once the highest interest rate date is paid off, move onto the next highest, and so on.
- Debt Consolidation: Consolidating your debt is an effective strategy when you have multiple old debts, high interest rates, and many different locations to make payments. Debt consolidation can reduce your interest rates, make payments more manageable, or reduce your payoff period.
- Debt Management Plan: Nonprofit debt counseling agencies, such as the NFCC, can be a great solution if you just can’t get your debt under control. They can help improve your credit health, lower interest rates, stop creditor calls, create one easy monthly payment, provide financial education, and offer affordable solutions.
Tip #4: Stay Disciplined
Staying disciplined is one of the most important factors when trying to improve your financial well-being. It is too easy to fall off track and be right back at square one with so many temptations and distractions. Below are four tactics you can use in order to stay disciplined through your financial journey.
- Know your weaknesses. You must acknowledge your shortcomings in order to finally improve your situation. Just as an alcoholic needs to admit they have a problem before their path to recovery, you must do the same with your financial situation.
- Remove temptations. If you can remove your biggest temptations out of your environment, your chances of improving your situation significantly increases. It could be as simple as taking a different route to work to avoid your daily Starbucks. Or as stated in the budget section, pay yourself first so you only have so much left over to spend on your wants. Eliminate temptations and you will greatly improve your self-discipline.
- Set goals and have an execution plan. When you have something to work toward, your self-discipline grows stronger. You become motivated and enthusiastic to accomplish what you have set for yourself. To do this, you must identify your why. Why do you want financial stability and freedom? Maybe you want your time back, or possibly you want to support your family through whatever life throws at you. Once you figure out your why, setting goals and creating a step-by-step action plan will be easy.
- Create new habits by keeping it simple. As I have stated a couple of times throughout this article, when you create simple processes, you tend to keep them up over time. When tasks are complicated and strenuous, your chances of giving up are much more likely. Take baby steps daily to improve your financial strength and your self-discipline will slowly improve.
Tip #5: Earn Extra Money with a Side Hustle
A side hustle is a great way to improve your financial situation and there are a plethora of opportunities. Obviously, the internet has changed the side hustle game, but don’t discount old fashioned ways as well! I had a friend who made an extra $700 a week by mowing lawns. He simply went around his neighborhood, gained a list of clients, and mowed their lawn once a week on the weekends. After doing that for two summers, he sold his list of clients to a larger lawn care company in the area for over $5000!
Again, don’t make it complicated. There are so many ways to make extra money, choose one you enjoy and be consistent. Below is a list of some popular side hustles:
- Lawn care/snow removal
- Sell things around your house on eBay and Craigslist. Get rid of that clutter!
- Drive for Uber or Lyft, or both
- Be a Bird Charger or Lime Juicer (Public scooters)
- Rent a spare room on Airbnb
- Post general laborer ads on Facebook and Craigslist
- Get a serving job for the weekends or evenings
Tip #6: Read Books and Listen to Podcasts
Get educated. There are so many resources out there to learn about financial wealth building it can get overwhelming. Choose a few resources and dive in.
Books I recommend:
- Rich Dad Poor Dad by Robert Kiyosaki
- Set for Life by Scott Trench
- Three Feet from Gold by Sharon L. Lechter and Greg S. Reid
- The Richest Man in Babylon by Richard S. Clason
- Lifeonaire by Steve Cook and Shaun Mccloskey
Podcasts I recommend:
- BiggerPockets Money Podcast
- How I built this with Guy Raz – NPR
- The Tony Robins Podcast
- Lifetime Cashflow
Listen to podcasts in your car, read books on your lunch break or during your free time. Find time to educate yourself and personally develop. Whatever resource you choose to learn about financial independence, make sure you are consistent and apply the information you take in.
Tip #7: Creatively Reduce Expenses
Reducing your expenses goes hand in hand with tracking where your money goes and budgeting. There are many ways to creatively reduce expenses that might seem insignificant at first, but with time and compounded on top of each other, can lead to big savings.
- Shop for cheaper car insurance
You might be paying more than you have to on car insurance. There are hundreds of car insurance companies that will be happy to have you as a client. Shop around for the best rates to significantly lower your costs.
- Refinance your mortgage
If you think you are eligible to refinance your mortgage, start calling around to lending institutions. Find local banks and credit unions to get more flexible terms and possibly better rates. You can lock in lower rates to decrease your monthly payment and increase your cash flow. This also applies to car loans. If your credit score has improved since you acquired your car loan, chances are you qualify for a much lower interest rate saving you money in the long run.
- Lower your utility bills
There are many ways to lower your monthly utility bills and there is no reason you shouldn’t. One of the easiest things you can do is replace all your old light bulbs to energy efficient LED bulbs. Another extremely easy thing you can do is unplug all unused electrical devices. Most electrical devices around your house constantly draw a small amount of power called phantom charge. This can add up quickly depending on how many devices you have throughout your household.
Other ways to reduce your utility bills are by installing programmable thermostats to automatically change the heating and cooling of your home when you aren’t home allowing you to save tremendously. Use power strips and timers to make sure you never leave the lights or electronics on. Air seal your home to reduce drafts which are common in older homes.
- Get a cheaper cell phone plan
Take a look at your cell phone bill and find out everything you’re being charged for. Look for any hidden fees or things that you don’t necessarily need on your bill, such as insurance. Call up your carrier and ask what alternatives you have and ways to reduce your bill. You might be paying for unlimited data, but you only use two gigabytes a month.
If you have been a customer for many years, consider switching to a new carrier to reduce your monthly expense. Whatever your case may be, there are options to reduce your cell phone plan, you’ll just have to consider what is most important to you.
- Save on Food
Pack your own lunches for work, cook your own meals at home. Shoot for around $2 per meal to significantly reduce your monthly food expense. Reduce going out to dinner and save it for special occasions. Buy generic food products when you can. Try it at least once and if you can’t tell the difference, continue buying it. Buy in bulk and use coupons. This will certainly help you target the $2 per meal goal. Slowly start to incorporate some of these food saving strategies and watch your expenses drop!
- Carpool or bike to work
Carpooling and biking to work might not be available to everyone, but if you have the opportunity, it can save you quite a bit of money. You will be putting less wear and tear on your car and saving on gas. You will also get to use carpool lanes where they are available to save you time on your way to work.
- Cancel memberships and subscriptions
Have you taken the time recently to see how many subscriptions you are paying for? $10 a month might not seem like a lot when you are signing up for that subscription, but what about all the other ones that you are already paying for? A research survey of 2500 Americans showed that they had guessed they were paying around $70-$80 a month on subscription services. However, when they actually dug into it, they were spending on average $237.33 dollars a month on subscriptions. That is almost 200% more than what they actually thought they were spending.
Take a closer look at all of your recurring charges every month. You may be surprised to see how much you are actually spending on subscription services. By eliminating many of these services you can save money that you completely forgot you were spending.
There are many things you can start doing to improve your situation financially even during difficult times, such as the Coronavirus pandemic.
If you aren’t tracking your expenses yet, that is the first thing you should start doing. It will open you up to so many opportunities to start improving your financial situation. From there you can build a budget and become disciplined to slowly climb the mountain of your success story.
It is truly up to you to take control of your finances. Times like the Coronavirus outbreak can certainly be difficult, but there are things you can do to combat the hard times. Track your expenses, create a budget, keep paying your debts, stay disciplined, earn extra money, educate yourself, and reduce unnecessary expenses and you will be well on your way to financial freedom.