Crisis comes in many different forms. It can happen at any time. And if ever there was a time where multiple crises might pile on top of each other, now is that time. Job, physical health, mental health, child care – it can be a lot of changes.
There are a lot of reasons for crisis out there and of course, we focus on the financial ones at our office. Sometimes there is help available in the form of cash. That assistance can be very important and even necessary for getting through tough times.
While our agency doesn’t provide cash benefits to clients, we help with an equally important piece of the puzzle, and that is working towards a sustainable long-term plan. The cash from other sources may get you through now, but what about when that money is no longer available?
One thing that we work with people on is putting together an emergency budget.
I think we all have an idea of what a budget is and, in my experience, that idea is often wrong. People seem to see a budget as a restriction. A budget is a limit that inhibits them. I think we need to change that perspective. A budget is simply a plan for how I am going to use my money to accomplish those things that are most important to me. It is a plan to say ‘yes’ to our priorities.
That regular budget is just a plan for where our money is going to go that provides valuable awareness based on where our money has been going so far.
So what, then, is an emergency budget?
It’s not really much different than a regular budget except that we adjust it to a new level of income and are more intentional about priorities.
In fact, as you are writing out your budget, go ahead and put those most important things right at the top of the list. This is the section that is probably non-negotiable. This includes things like housing, car payment, utilities, insurance, and car payments.
As we move down the list to lower priorities, we now have to start evaluating which things are adjustable to make sure we are spending less than we are making. This may include things like entertainment, clothing purchases, or gifts for people.
Do you really need the full, maximum premium ultimate cable package? I understand you are probably at home a lot more right now. But we need to focus on keeping that roof over your head. Premium cable channels aren’t going to play a positive role in that goal.
Then, as we continue to work through your list of expenses, we are now coming down to those things that you know you don’t need. You just like them. And that is just fine…… as long as you can afford it. If you have experienced a reduction or loss of income, you may not be able to afford them. At least not right now. But by controlling spending on these items now, we lessen the long-term impact which means you can affordably return to these items much sooner.
I get it. None of us really likes having to give things up. We generally want what we want when we want it. I’m not saying you can’t have those things and neither is your emergency budget. Maybe you just have to put them off for a little while.
Consider an alternative. We continue to spend as we always have even though we no longer have the income to do it. How? Credit cards. To be honest, this isn’t a time-of-crisis issue. It’s kind of an all-the-time thing for many people. So you get what you want now and then just pay it off over time. Except that is with interest. Right now, that interest averages around 19%.
If you take your time to make payments after returning to full-time work, refusing to say ‘no’ to those extra things may result in THOUSANDS of dollars of interest. By saying ‘no’ to spending now, you potentially have thousands of dollars of extra money in the future.
To make it very simple – if you say ‘yes’ to something now, what are you going to have to say ‘no’ to in the future? It may be worth it and then that’s just fine. I just want you to make an informed, intentional decision before you continue your current spending habits.
If you would like some help figuring out where your spending is happening or coming up with a plan to face the challenges head-on, the counselors at the Center for Financial Resources can help. As we continue to serve people over the phone and through our secure internet portal, you can schedule an appointment by calling us at 605-330-2700 or by visiting our website at CFR.LssSD.org.
written by Breck Miller, Community Relations Coordinator
images courtesy freedigitalphotos.net
LSS Center for Financial Resources
Consumer Credit Counseling Service | Housing Resources | Sharpen Your Financial Focus| Financial Fitness Education
705 East 41st Street, Suite 100 |Sioux Falls SD 57105-6047
605-330-2700 or 888-258-2227
Strengthening Individuals, Families & Communities