We know your kitchen table. We have one just like it.
Kitchen tables aren’t numbers or graphs or tables. Kitchen tables are the real world, the real concerns and issues facing American families. And despite all the glowing numbers in the economy about people being employed, the reality is the economy has been stagnating, and that kitchen table is seeing as much or more stressed faces over it than at any time in the last generation or two.
Wages have stagnated if not dropped. While the unemployment rate (officially) is down to levels not seen in almost a decade, the number of people not in the workforce is at the highest level ever recorded. There is a record number of part-time workers and workers who have two or more jobs just to make ends meet. And still some of those ends aren’t being met.
Since the Great Recession of 2008, we have been in a continual phase of survival, and there is no real indication that we will be digging out of it anytime soon. Sure, there is hope for change with a new administration coming into office, but hope doesn’t pay the bills month to month.
Some of us still feel the risk of losing our jobs, or the hope to starting a new business, and many are stressing about the increased cost of many things while we are making no more money than we did two or three or six years ago. In that vein, are you finding yourself in survival mode? Have you been here for a while and now feel your patience and nerves are running thin?
Let’s take a deep breath and go through some steps on how to financially survive in the midst of a storm of uncertainty, develop some positive money habits and make them stick even after you get on more solid financial ground.
6 Tips To Help You Survive Financially
#1. Have a budget meeting
Sit down over that kitchen table with your checkbook and your budget, if you have one. If you don’t have a budget, this would be a great time to make one. In your current budget, take a hard look at every line item and start prioritizing your expenses honestly. Focus on the necessary categories like housing, food, utilities, transportation and basic clothing.
If you can fund all those categories with your current take-home pay, then look at other categories like toiletries, entertainment, gifts, cable TV, etc., and start cutting back or eliminating those expenses. If you have had a vacation budget, you might want to put that on hold in survival mode. You can’t reasonably justify a vacation if you’re living paycheck-to-paycheck.
#2. Divest the debt
As you look over your budget, remind yourself of any and all debts you have outstanding (except for your mortgage, but include a home-equity line of credit). As you eliminate the less-important spending, could some or all of that money go to paying off a debt or two?
List all your debts in order from the smallest balance to the largest. Throw all your extra money at the smallest debt, paying only the minimum on all the other debts, until that smallest debt is gone. Then take that saved money and roll it on the next-smallest debt.
Do this as much as you can in survival mode. Even eliminating two small debts that might save you $30 a month in payments can add up when you’re trying to get by.
As a note, if your home-equity line balance is 50 percent of your annual take-home pay, don’t consider it a debt to pay off while in survival mode. You can push that off and treat it as part of the mortgage.
#3. Saving pennies
You should never have a mountain of savings when you have debt. At the very least, in survival mode you should have about $1,000 socked away in case of an emergency. Cars breaks down, water heaters break, emergency-room visit because the boy needs stitches all happen regardless if you are in debt or not.
Even while you’re surviving, you still need some kind of buffer to protect your budget. If you have more than $1,000 saved, drain the savings down to $1,000 and use that money to pay down or pay off debts.
Keep the savings at $1,000 while you are paying off debt. If you are caught up on debt, then you can start to put some additional money away every month to build up that emergency fund until you have at least six months of expenses saved.
#4. Be a home-lancer
Now that you have a survival budget, you’re attacking debts and you’re down to your $1,000 emergency fund, it’s now time to find ways to add to your income. Whether it’s starting a freelancing business on the side, where you do some things online, turning your hobby into a business, or doing some babysitting or delivering pizzas, every little bit of money you can bring in will make a big different when you’re surviving. The options for making extra money are almost unlimited.
Every bit of extra money you can earn should go into paying off debt or building up the emergency fund. Do not use it to add back any of those “unnecessary” expenses unless and until you are out of survival mode and have a six-month emergency fund.
#5. Egging the Nest
Even while in survival mode, the idea of contributing to your retirement should be prominent in your mind. If and when you can, put something away for retirement, even if it’s just a certain amount once a year or quarterly. Every little bit helps when you are compounding interest for 10 or 20 or 30 years.
You can sacrifice a little of the emergency fund and put some money into retirement, since retirement fund money will grow at a much faster rate than savings. But do not fully fund retirement until your debts are paid off. Once you are out of survival mode, you can begin funding retirement for the full amount each year.
If your survival mode comes about from being unemployed or underemployed, or even if you are opening a small business, use your friends and business connections that you have through LinkedIn, Facebook or Twitter to get opportunities for new work or to land some clients for your new business.
Spending a couple hours a week reaching out to connections through social media and setting up some brief meetings with them will go a long way toward getting you in the door for opportunities to make money that you might not have otherwise considered or even known about.
Many times it does come down to who you know and not what you know, so take advantage of who you know and leverage those connections to find new income opportunities.
The Bottom Line
Survival mode is never ideal and it is meant to be temporary. But the key to survival is to always live within your means. At the same time, if you get used to living in survival mode, then when the storm blows over, you can take those money habits forward and maximize your monthly surpluses to save for the future and to have some fun and improve that quality of living. This way you go from survival to thriving without much headache.
Jon blogs at Money Smart Guides, a site that helps readers get out of debt and start investing for their future.