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No Emergency Fund - What Now?

March 26, 2020
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So, what can you do if you don’t have emergency savings and, like many people right now, are staring down a significant financial hardship?

If you don’t have an emergency fund you are probably operating on paper thin margins. That means any disruption to your income becomes serious right away. So, you need to quickly identify and act on the impact of that disruption. Many of these suggestions you might have already heard, but it can be hard to put them in place quick enough to make a difference.

It’s time to make that budget you have put off. Be deliberate about setting aside the time to look at your finances. It’s important to see your income and expenses in black and white so get them on paper and be honest with yourself. Use your bank statements to determine your spending habits because the numbers won’t lie. It helps to round up your expenses and round down your income to create a buffer in case you miss something. It might be time to look into a budgeting app to help keep you on track. We have a budget and net worth spreadsheet that may be a good starting point and it won’t bombard you with credit card ads. Once you have figured out your average monthly cash flow situation it is time to look at how that has changed or will change. What income will you have going forward? Are you still bringing in enough to cover your bills and do you expect that to remain the case? If not, how much is your monthly deficit going to be?

The most immediate step you can take is to trim the fat. If you are really in a financial emergency, it is time to cut out as much discretionary spending as possible. This will probably be difficult, and it may mean taking a hard look at what you and your family prioritize. With everyone on lock down you may want to hang on to that Disney+ subscription or risk a mutiny. Also having subscriptions to Netflix, Hulu, and HBO Go may be a little overkill, though. That is if you aren’t just using your sister’s friend’s cousin’s login info for them already. What we want is efficient cash flows and that means prioritize the necessities and minimize everything else. Many necessities are also discretionary to a point. You can’t live without food, for instance, but you can live without ordering through Door Dash every other day.

So, you cut out all the discretionary spending including your trucker hat monthly subscription box, but you are still looking at a monthly deficit. Have you filed for unemployment benefits? Unemployment Insurance can be used in situations where hours have been cut even if you haven’t been laid off completely. Check with your state and find out what you are entitled to as soon as possible. There will be a lot of people filing and claim processing will likely be clogged. Are you able defer payments for your mortgage, vehicle, or credit cards? Call your lenders and see what is available and keep abreast as states press these companies to provide relief. Have you filed your taxes yet? While the deadline has been extended it may be good to file now if you are expecting a return. As I am writing this the federal government is coming to terms on a stimulus bill, but it is unknown when Americans will receive these benefits. Work off the information that you do know and if a stimulus check is headed your way it should ease the tension but don’t rely on it.

The next step is to work. If you need to work and are able, there is work out there. Look to the industries that are hiring for temporary workers through this crisis. Amazon, Walmart, grocery stores, and retail pharmacies are, in many places, hiring to supplement their increased demand as shelves are being emptied and the crisis highlights the importance of these companies. Getting a temporary job will take serious consideration. It might take time to get hired and you may have increased responsibilities at home as schools have closed. It is also extremely important to take precautions to keep you, your family, and the public safe.

This is the time for you to take command of your financial situation. Do not be paralyzed by poor decisions you have made in the past. We all make bad decisions from time to time, but if you let those decisions weigh you down their effect will be compounded. You can get through this. Move forward knowing you can come out the other end better equipped to face financial adversity in the future. It will be difficult and will require immediate action, but you are capable and there are resources available. Until next time, be safe and trust that this will pass.