Money Saving Tips in the Time of Crisis

In times of crisis and great uncertainty it is easy to panic and to focus on the short term and to forget about the long term. The current economic situation is scary, but for most of us it will pass. How do I know this? Because in 2008 I faced the same thing. I was laid off from my job right as I was starting to develop my career in the face of a slow recovery. Despite that, I was able to meet financial goals – I paid off my student loans and bought a house. I do not want to pretend I did not have some advantages. I was lucky enough to have gone to college. I was married so we had a two-income household. However, these hints helped me, and I hope that they can help you too.

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1) Have a plan. It is too easy to go from paycheck to paycheck and shuffle what you’re paying and then to splurge when you have a little bit more if all you’re doing is focusing on the next paycheck. By having concrete financial goals, you are saving FOR something and not just nebulously putting money away. This mental accounting means that if you decide to splurge you are taking something away from your future self that you have already decided you want. This goal can be something small like those Riotfest tickets or something bigger like a house. As the saying goes, if you fail to plan, you are planning to fail.

2) Track your money. The biggest thing I did to help myself was to start plugging in all my financial information into the website Mint.com. Mint acts as a central repository that allows you to track your spending and wealth growth across all your accounts. What this does is not only allow you to see what is going on in the short term with your money, but also what your larger trends are in terms of your spending month by month and you can watch your net wealth grow. If you have software that you trust, you must commit to staying on top of things. You will make better financial decisions when you have an ongoing snapshot of your financial position in your head.

3) Pay yourself. One of the best things you can do is to automatically have a set amount of funds go directly into a savings account. Set this up through direct deposit if you have the ability. If you have an account that is savings and you never see the money in your checking account then it was never yours to spend, but it goes into savings for your future self’s goals. If you do not have direct deposit you can set up a small deposit from your checking to a savings account on a regular basis. This does not have to be a lot. As little as five dollars a week can start to grow a nest egg. The other thing to note here is that if your company offers a match on a retirement account, you should save enough of your paycheck to at least get the match. Not only is it free money in the short term, depending on the kind of account you use, you might gain tax advantages.

4) Cheat. Though you do not want to steal from your long-term goals, the point of saving money is to meet those financial goals. The point is not to live like some Buddhist monk. If you want some ice cream or some avocado toast, get that threat. But you must do this in moderation. Enjoying small luxuries can help prevent the splurge when you have totally denied yourself.

5) Inherit Money. This might be the hardest one to pull off. Hopefully you have someone that is connected to you who is a bit older and has some capital put away somehow. This is the opportune time for them to die so that you can get some of that capital. Now, I hope it isn’t someone you care about a lot, since that would add in tragedy and we don’t want that. You don’t need to inherit a lot either. Back in about 2010 my wife’s grandma died and had a windfall of about ten thousand dollars. That was enough to pay off most of our debt and turn the cash that wasn’t being consumed from debt service to savings. Soon after that, we were putting a down payment on our house!

I hope that you can take away a couple of things here and help you meet your financial goals. I know it is a scary time and most of us have debt already – that should be paid down promptly. Some debt loads feel so crushing that it feels like you will never be able to get out from underneath it because you did all the right things and got the degrees and impressed your parents but still live on six figures of debt with a five figure job. The advice you hear to have six months of savings in cash just sitting around is hard to reconcile with studies that show 40% of Americans cannot cover a $400 emergency expense. But if you follow these steps you can start to turn around and face the uncertainty off the future with a small plan to make sure you have financial flexibility in the future.