By Article Author
Currently, millions of people are facing a seemingly insurmountable task of staging a financial comeback within their businesses and households. Hopefully, many are taking a closer look at the importance of savings and liquidity and reassessing their overall financial health.
Hopefully, many are rethinking paying off debt and staying out of debt. How would your financial situation been different if you did not have a car payment? Would you have been able to make ends meet if you did not have to make the credit card payments? Would you have been better off if you had spent the last 10 years building an emergency fund of 3-6 months cash for living expenses?
So, how do we set ourselves up for a financial recovery? First, you need to create a plan. Everyone should have a written spending plan. You should know every month if there is going to be a surplus or shortfall. A spending plan is having a plan for every dollar that comes into the household and being intentional about every dollar that is going out. We need to do all we can to make sure that income is greater than expenses. What you track you control! I know this is easier said than done but it is possible.
Second, establish an emergency fund of 3-6 months of your living expenses. As the saying goes there is nothing like having good old-fashioned cash! Cash really is king and could make all the difference when black swan events happen. If your job and/or income is very stable, you could get by with 3 months. If your job and/or income is not stable, you should lean toward 6 months. Make sure saving is a line item on your spending plan.
Third, be aware of the things that are barriers and detractors from building wealth, namely taxes and interest. If you are normally receiving a large tax refund each year, you can look at this from two perspectives. You can use the refund as a forced savings for emergency fund. You can also adjust your withholdings to receive more money each month in your paycheck. Besides taxes, interest is one of the biggest items we pay. When you add up the interest from mortgage, car payment and credit cards, a large portion of your income is going to someone else. Eliminate these financial killers and start building your own wealth.
So many of us work hard and sacrificed for a chance to live a better life. I would like to offer a bit of hope that you can do this. We will all get through this current hardship and we can still have a taste of the American Dream. We can become the best versions of ourselves financially!
