It is March 2020, and we are in the middle of the Coronovirus outbreak. State and federal governments have shut down restaurants, gatherings over 10 people, and discouraged travel. People are “social distancing” to reduce the spread of the virus until hospitals can accommodate the sick that they anticipate will flood in.
The problem is: it is rocking the economy. The stock market is down 29%, worse than the busts of 1987 and 2008. Many of my friends and colleagues who are small business owners have lost half, if not all their income due to social distancing requirements. Folks are struggling to make ends meet. And sadly, 75% of Americans have less than $1000 saved.
Panic and fear have been rampant, with people buying up all the toilet paper in stores, and fighting each other for hand sanitizer online. Not having enough puts us into the fight-or-flight response.
Our hearts race. We feel dizzy and panicked. We watch the unpaid bills pile up with dread.
In times like these, do you see why savings is essential?
Savings allows you to keep a mortgage/rent payment, keep buying healthy food, keep stability for your family despite economic fluctuations. Savings helps your peace of mind
I used to have ZERO savings. For years I thought if I just “was positive” then emergencies would not happen to me. When shit hit the fan, and I needed a big car repair, or had a large business expense, I would just hustle and scramble and get the money together somehow.
This was empowering on one level~yes, the universe ultimately always helped me win. But was I helping the universe, or making it harder on myself? I was always stressed out.
I chased my tail for years, working my butt off in order to clean up the messes I left in my wake. “I owe, I owe, so off to work I go”.
With no savings and no plan for my spending, I just kept accumulating debt.
I would pay it all of, only to have it grow back.
Finally I started to slowly see that dips in the economy, or in one’s personal life, are not just theory, they happen. Statistics show that each of us will have at least 1 major negative financial event(divorce, death in the family, car replacement, health challenge, job lay-off) every 10 years.
I myself went through a divorce and became a single mother.
And the pain and stress of this was too much.
I finally got off the roller coaster.
Even though I was only bringing in $1500 a month, I knew things had to change.
I was DONE with the stress and said "NO MORE!"
So, even though I had a low income.
Even though I was scared.
I rolled up my sleeves, and attacked my expenses, grew my income with hustle, heart & grit, and turned my situation around.
I paid off the debt, and built a fully-funded emergency fund. I had raised my net worth by $40,000.
And my life was forever changed!
I was able to go on to join forces with my new husband, save an extra $150,000 together, purchase a home, and start investing.
But the transformation started when I was a low-income single parent.
Now you may be thinking, this is great, but how do I begin to save if I am in crisis?
You do it like a single mom with a low income.
You start small.
You stop being a victim, and blaming others.
You take responsibility.
And build from there.
THE SAVINGS STEPS
1. STABILIZE YOUR HOUSEHOLD
If you are low-income, or in crisis, I recommend you start with the 4 Walls. Start with taking care of your castle first. Then you can start giving and saving. The 4 Walls are: food, shelter, transportation and utilities. Place all debt payments on hold if you need to as well.
Talk to your landlord/mortgage company if you need to defer payments. Most reasonable people will work with you. Go to the food bank if needed. See if you can carpool or reduce your transportation costs. Talk to your utility company so you can keep the lights & water on.
Once your household is stable, then you can fight your way through another day.
2. $1000 FIRST
After your household is secure, the first saving step is to accumulate $1000. This “baby” emergency fund will help you deal with small emergencies and keep them from destroying you. Sell stuff online, take on a side hustle, cut out all unnecessary bills, etc. (More hustle ideas in the "how to" section below).
If you are an entrepreneur, manually transfer money from checking into savings at the end of each month. If you have a regular job, you can have your savings automatically deducted from your checking account and transferred into savings.
3. DEALING WITH DEBT
After you have your $1000 I normally recommend you eliminate debt entirely. Shift your savings each month to paying off all consumer debt: credit cards, student loans, personal loans, car loans. If your income is stable during this crisis, you can continue to do debt elimination.
However, if your income is unstable during an emergency such as the Coronovirus epidemic, pause the debt snowball. Pay your minimums if you can. PILE UP CASH! Then, once the emergency has passed, you can go back to paying off your debt.
3. FULLY-FUNDED EMERGENCY FUND
The next step is to accumulate 3-6 months of expenses in savings. This bigger cushion will be the biggest gift you can give yourself. Believe me! Once I had this fund, as a single mom, I relaxed in a place I didn’t even know I was tense! I finally felt peace of mind.
My clients report that they have fewer “emergencies” once they have built the emergency fund. Rather than being a negative attractor of danger, the fund seems to repel problems. And when problems arise, they can be handled with a lot less drama.
"HOW TO" SAVE WHEN TIMES ARE TIGHT
So how do you build savings when your income is down? For those who are in economic hardship, the thought of trying to save money is hard, but not impossible.
REMEMBER I raised my net worth by $40,000 as a single mom bringing in $1500 a month!!
Savings in a crisis does take focus, and dedication.
You need the 3 Big Money Tools: Acting Your Wage, Being Willing to Work, and Using a Budget.
A. Act Your Wage.
This was the most important step for me as a working single mother AND as someone knee-deep in debt. I had to let go of “keeping up with the Joneses” and cut my lifestyle drastically to turn things around.
Acting your wage means not pretending to be wealthy, when you are actually in debt or have minimal savings. This time I was willing to not look good for a while, in order to get my financial house in order. I rented out a room, stopped ordering takeout, looked for sales, and started using coupons. I said, “no” to my kids a lot, and made them earn their own spending money.
Anyone can do this. I got food stamps and state sponsored healthcare. Remember this is a temporary sacrifice, for a lifetime of financial security.
Where could you cut the fat out of your lifestyle, in order to free up cash for saving?
B. Be Willing To Work.
The second thing I recommend is to be willing to do whatever it takes to generate the cash flow needed to progress along the Baby Steps. I recommend dropping the “poor me” attitude, and just getting down to work. Can you take on a delivery job? Work at a grocery store? There are jobs available if you are willing to hustle.
As a single mom I took on a side job at a housewares store, made calls to get extra music gigs, and networked to keep my coaching business strong. I sold stuff around the house. I applied for grants for my business. If I can do it, you can do it.
Also there is no shame in looking for free money, discounts, and grants such as Dreamsavers. There are many free resources out there, from free food at the food bank to business grants.
Stop the whining! Your work ethic and willingness to do whatever it takes are an essential part of your success. Even if you deliver pizzas, you can make an extra $1500 a month! Having more cash to build savings helps keep the ball rolling!
What can you do to bring in extra money right now?
C. Do a Monthly Budget.
The third thing I recommend is to have a monthly written plan for your money, aka: a budget. The cash flow planning form on www.daveramsey.com is great, as is Dave Ramsey’s free budgeting software www.everydollar.com. I have used both.
Having a written plan means you are conscious of where your money is going each month, and you give every dollar an assignment. This also helps you have margin to save, and shows which categories in your budget are out of balance. I talk to a lot of people, for example, whose housing costs are 50-70% of their income. And they wonder why they can’t get ahead!!
The ideal percentage for housing is 25% of your take home pay, leaving enough for debt repayment, saving, and living a good life. When you see how you are giving, saving, and spending, you begin to feel more in control. A budget is empowering!
How soon could you start or upgrade your budget?
So what are you waiting for?
Start piling up cash! It is possible, even in a crisis.
You will get through this. And hopefully this will be the time you say "never again" to being in debt with no savings.
But for now, keep your attitude positive and keep looking for the silver lining. Stay in touch with those who cheer you on and want you to succeed. And let me know when you have your $1000 emergency fund complete!
Bye bye fight or flight!
Coach. Teacher. Author. Speaker.