Quarantined? Time to get your Finances in order

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COVID-19 has put the world on pause – literally. Citizens are quarantined in their homes, countries banned travel, closed their borders, and global finances are upended. If someone told me this might happen to the world, I would think they were crazy. But here we are.

For me, I am stuck in Kuwait. I am supposed to leave in April after a nine-month tour, but now I am extended until corona blows over. It sucks. But someone needs to keep an eye on the malign actors in the Middle East. Even corona doesn’t keep them from causing hate and discontent.

But I am not writing this article about me, it’s about you. Financially, we’re seeing the world struggle. Companies are failing – again – unless they’re bailed out. But what about the people – you? When companies start failing, employees are the first ones cut, let go, put on furlough, or fired. For anyone, that is a traumatic event causing financial fear that you won’t be able to feed your family or survive. If that’s you right now – I am truly sorry.

In my early twenties, I hit my “money” rock bottom – luckily, my parents bailed me out, but my Dad required me to create a budget and stick to it. It was one of the few times that I learned from my mistake without repeating it. Now I know what you’re thinking – you think I am going to suggest creating a budget and blah blah blah. Nope – that’s only one component, so you’re partially right. We need to look at your whole financial situation – what better time than now when you’re quarantined in your house for fourteen days?

Quarantined Finances

I am usually a pessimist, but sometimes I see the silver lining. In this case, you have no reason to avoid your finances, because well, you have nothing to do for the next fourteen days while quarantined. I am a “hands-on” person, therefore, I recommend printing out all your income and spending since January 1st, 2020. Lay it all out there for you to see – something tangible you can organize and visually inspect. If you’re single, grab a cup of coffee – if you’re married, grab your spouse, and a cup of coffee – for both of you. Time to start quarantined finances!

Where is your money goin’

For this part you might need some Brooklyn 99 inspiration, cuz you’re about to do some detective work. It’s time to discover where your money is goin’. It’s surprising how fast you can spend money without thinking about it. Now start highlighting with various colors (I know it sounds fun!) from your bank statements, credit card statements, or any other expense statements – I recommend selecting colors for:

  • Utilities (electricity, phone, gas, water, etc.)
  • Subscriptions (Netflix, Hulu, Shave Club, etc.)
  • Entertainment (eating out, fast food, etc.)
  • Groceries
  • Bills (car payment, rent, house, insurance, etc.)

There is no limit to the number of categories, just make it specific to you. Some people have a category for Coffee or Starbucks because they spend a lot there. You can have three or twenty-five categories, it doesn’t matter.

If printing out paper (save the trees!) and highlighting it is not your thing – luckily, two programs aggregate your income and earning statements for FREE. They even categorize your spending for you – pretty neat, right? The FREE programs are Personal Capital and Mint.

Ok, I will give you some time to get your detective on and find out where your money is goin’.

Need help with a budget? >> Read my guide here.

Dang, that’s where my money is goin’

Alright, now that you know where your money is goin’ – it’s time to make some changes. Go through your expenses – stuff you spending your money on – and cross out “wants.” Just because you WANT it – like that cute sign for the kitchen wall, or that self-hammering hammer – doesn’t mean you NEED it. Now total it up – how much was it?

For some, it might be a lot – for others, not so much. But I bet, more people realize they spend way too much on something – like Starbucks or Amazon – than those who don’t. Now, this is where I drop the line – create a budget! Don’t worry it’s easy. I have a handy guide that gives you access to free excel sheets and free programs that automatically budget for you – make sure you read this!

Also, a very important component of budgeting is cash flow.

Cash flow simply determines how much income you have leftover after all of your fixed and variable expenses. Once you know if you have a positive or negative cash flow. You can develop a budget.

Now that you know where your money is goin’ and found extra cash that could be saved for elsewhere with your budget (don’t start thinking of things to buy!). Remember, the goal is to fix your finances so when a disaster strikes like a pandemic, you have enough money on hand to survive. Which brings us to the next part – emergency fund!

Buildin’ disaster savings

After building your budget, I hope you were able to identify money that could be put towards an emergency fund.

Before the financial crisis of 2008, personal finance experts recommended that your emergency fund contain three months’ worth of expenses. Now, new financial guidance is to have at least six months’ worth of expenses saved up.

That statement is once again relevant with the COVID-19 situation. We don’t know how long this will last, or how our economy will react. However, by having 6 months of expenses saved up you can breathe easy – WOOSAH – knowing you will survive until it blows over.

Building an emergency fund? >> Read my guide here.

Your emergency fund needs to be liquid – aka cash – and readily available. I recommend opening up a high yield savings account (HYSA) where you will earn mo’ interest on your savings than a standard checking or savings account. Once you discover how much money you need to survive for 6 months, deposit money into your HYSA monthly or every paycheck.

Trimmin’ it down

You got a budget and started throwing mo’ money into your emergency fund – what else? One thing I keep hearing from families who are quarantined is the amount of money they’re saving. They have stopped going to the coffee shop for their daily brew, to the bar for a quick drink after work, and fast-food after soccer practice. But let’s not stop there! You can save more by reviewing your monthly or annual subscriptions to see where you can trim down. Often, subscriptions are forgotten about or overlooked, especially annual ones.

Until I started reviewing my budget and expenses monthly, I wouldn’t have caught that annual Adobe subscription that I have no intention of using next year. Sound familiar? Subscriptions are convenient, but are deadly for your wallet – $9.99 a month doesn’t sound like much until you sign-up for ten of them…

Trim is an app that will automatically organize all your recurring monthly charges—and help you cancel the ones you don’t need. You can set it to text you spending alerts, balances and how much you spent on Uber last month.

So, take a look at your subscriptions and cut out what you don’t need. Do you need Netflix, Hulu, Disney+, HBO Now, and CBS All Access? Probably not. Pick and choose.

Final Thoughts

I hope this gave you the motivation to review your finances – while also being fun! What’s better than quarantined finances? I understand the financial struggle is real right now, but at least you have a financial plan in place for next time. President Trump signed the $2T stimulus bill today, which should help lots of families through the crisis. Stay strong!

You never know how strong you are until being strong is the only choice you have. 

– Cayla Mills

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