How to Stop Living in a Financial Emergency
Have you ever noticed that when you are low on funds in your account that it seems like there is always an emergency arising? If not, then congratulations, you have either learned to live in a way that allows you to save, to spend, and hopefully to give. When financial emergencies seem to constantly arise though it has an effect on how life is lived.
If you are living a life that feels like a financial emergency then this is for you. YOU have the ability to change your situation, but it won’t be easy. The very first thing that you can do to change your situation is to change your perspective. In this world, especially in America, we have been taught to believe a variety of things. Some of these things you may believe and others you may not, but here are some basic beliefs that are not true and will keep you from seeing your life differently than it is right now.
-Debt is ok and is normal, everyone has debt.
-We need the latest and greatest thing.
-We deserve to go on vacation because we work hard.
-We deserve to own a house.
-The rich get rich and the poor get poorer.
-The government has a responsibility to take care of me.
-You will have time to save money later.
-No matter what I do I will never get ahead.
First off, let me preface this by saying that I have lived beyond my means and was on the brink of losing everything I had. Many of these thoughts went through my mind in the past when I continued to live life to the fullest that my paycheck would allow and then some. What I had to learn was that these things are lies and that my road to financial freedom required me to change my attitude and behaviors.
I had to experience a change within before I could start to experience a change on the outside and you will have to experience the same thing. Your attitudes, your beliefs, and even your habits will have to change before you will be able to change your situation and if you are not ready to do that then keep reading at a later date when you are ready because unless you are truly ready to give it your all you likely not succeed.
If you are still reading then you are ready to get busy, and for some of you that will literally mean with another job, garage sales, down-sizing, down-grading etc. If you are not already living on as little as possible then you need to start. The first thing that needs to happen is to cut all spending that is not needed. For each of you that will look different, but remember that the more intensely you approach this the faster you will be able to get out of emergency stage and be able to start being able to have money left over at the end of each month to start paying off those nagging bills that only seem to get larger each month.
Some ideas of things to cut or things to do include the following:
-Cut the cable, the phone, the internet, and all non-essential items (by the way it will be hard).
-Eat at home and pack a lunch for work.
-Have a garage sale! We all have stuff that we do not need.
-Sell a vehicle, if you are upside down you might have to wait.
-Get an extra job or work overtime.
-Get away from negative people and surround yourself with people who will encourage you.
The idea is to cut your lifestyle as much as you can, at least for a while, so that you can stop going further into debt. The next big thing that must happen immediately is that you must figure out where your money is going. That means that you must sit down and make a budget. Here is a sample budget form (budgeting-forms) that you can use or find your own. A great online budgeting tool/app is EveryDollar and the best part is that it is free.
The easiest way to start a budget is to take the budget form, either the one here or your own and start going through the money that you are spending and making and list it all out in different categories by going through receipts, banking statements, bills etc. If you do not have any of this information available then your first step is to start tracking where you are spending your money. The idea of the first step is to know what your money is doing or rather what you are doing with your money.
Next, while you are getting your past spending for the month organized you need to find out how much you own on all of your debts as well as what the minimum payments are. List out all of your debts from largest to smallest along with the minimum payments on them on your budget sheet.
If you have accomplished listing out what you have spent by category and have listed your debts then you can probably already see why it seems like you cannot get ahead. When I was not living on a budget I easily spent $500 a month on fast food. That was one of my first areas that I was able to cut in order to get money flowing in the right direction.
With your income and your spending areas categorized the next step is to create a budget where you do not have any money left over at the end of the month. What I mean by that is that you should cut as much as you can in order to quit going into debt and if you still have room to cut then you need to start putting money into savings.
Between cutting your lifestyle, selling stuff, and working more hopefully you now have money that is able to go toward saving an initial emergency fund. Stop and think for a minute about what “emergencies” stress you out the most and how much they cost. What would it feel like to have enough money in savings to be able to cover that emergency plus more so that if you had two or three emergencies you could cover them? A good starting point for an initial emergency fund is about $1000. This is not enough to cover a lot, but it will more than likely keep you from going further into debt if an actually emergency does happen. It’s also not so much that you feel completely safe which will take some of the motivation away that you need in order to start tackling your debt. Only you know your current situation though so if you know something is about to break start saving to replace it if you need it and if you know you need a little more or less than $1,000 then adjust to what you need, but don’t get carried away, you will have time to build up your full emergency fund of 3-6 months of living expenses later.
Living life as an emergency is extremely difficult. It causes us stress, it is discouraging and can make us feel like we are failures, and it makes us feel unsafe. The road to financial freedom starts with you and your attitude. It starts with you and your commitment. It starts with you and your courage to do what others are telling you that you cannot do. The road to financial freedom starts with believing that it can be done and knowing that you are the one who has to do the work.
“For I know the plans I have for you,” says the Lord. “They are plans for good and not for disaster, to give you a future and a hope.”
Fear of the Lord is the foundation of wisdom. Knowledge of the Holy One results in good judgment.
If you would like some help starting this process please contact me today so we can create a plan that will work for you and your life on your path to financial freedom.