PREPARE FOR THE WORST (and hope for the best)

PREPARE FOR THE WORST (and hope for the best)

“The prudent see danger coming and take cover.”

So, how do we prepare for the worst and how do we plan for the unknown? When we’re in panic mode it is very difficult to plan and prioritize. A helpful exercise is to imagine ourselves one year from now. Looking back, what would we wish we had done differently in regard to our finances?

Here are a few things that I think are really important:

1. Prepare or update your will.

We all know that we should have a will and keep it updated, but it’s usually a low priority since we don’t plan on dying anytime soon. So, let’s take action and prepare our wills.
This does not need to be expensive or difficult. There are online templates to fill out and you can notarize a will for free at your MLA’s office. My husband and I plan to update our wills this week.

2. Make sure you have life insurance.

Maybe purchasing life insurance has been on you to-do list for a while. Now is the time to put that in place. Why is life insurance important? Life Insurance is a lump sum, tax free payout to your beneficiary upon your death. A life insurance policy can pay off any debts that you leave behind that would be a burden to your family (mortgage, credit cards, car loan, funeral expenses). Life insurance can help you with peace of mind, knowing that your family is protected should something happen to you.

3. Do some research and seek wise counsel.

None of us have ever lived through a global pandemic and the resulting economic fallout. No one knows what lies ahead or how best to prepare. However, we can seek out wise people and learn from them.

Recently, I’ve found tremendous help and perspective from a man named Hans Johnson. For a number of years we attended conferences lead by his wife, Dani. We found a lot of encourage and wisdom at those conferences. As we got to know them, we came to trust them.

Hans is a business man, investor, and philanthropist. Since the pandemic he has posted a number of videos regarding how the economy may be impacted in other the short and long term. He offers a big picture perspective that is eye opening. He challenges us to:

  • Prepare for the worst and hope we are wrong.
  • Do not panic, but take action.

Click here to hear from Hans Johnson (Video 1, Video 2, Video 3)

Let’s be people of action, who see the danger, and take steps to prepare.

HOW TO HUNKER DOWN FINANCIALLY

HOW TO HUNKER DOWN FINANCIALLY

Help! I’ve lost my job!

Whether you have lost a job or you are in a prolonged season where your expenses are higher than your income, the result is the same: Stress.

When we are stressed, it is hard to make good decisions, to think clearly, and to plan for the future with confidence.

We were in this position for a long time. I dreaded opening the mail (and often left it unopened for a month or more). Paying bills was extremely stressful. We owed more than we could pay and had to choose which ones and how much.

How to Prioritize

In this past week, I came across some common sense advice that I wish I had known when we were struggling.

It’s simple, straightforward, clear advice in a video by Dave Ramsey (click here to watch the video … at about 16 minutes)

I’ll sum up one of the keys ideas here

Focus on the Four Walls.

The only thing we need to do with our money when we have lost our job is take care of the ‘Four Walls’ of our house.

The Four walls are:

  • Food
  • Shelter
  • Utilities
  • Transportation

We should take care of these priorities in this order. Buying food for our family is our top priority. Then we pay our mortgage or rent. Next, we pay our utilities: water, power, electricity. Finally, we make sure we have transportation so we can get to work.

You don’t need to worry about anything else right now. Credit card payments can wait and student loan debt can wait. You don’t need to put money into investments or savings right now. Take a deep breath, and take the pressure off yourself. Your goal is simply to meet the basic needs of your family.

This is so concrete and practical. It would have reduced my stress and helped me have confidence in my financial decisions during our painful time.

During a storm, the goal is to hunker down, take shelter, and weather the storm. You don’t want to panic. You just want to lay low, wait for the storm to pass, and do whatever you need to survive through this season.

In the last half of the video, Dave Ramsey and his team also talk about finding work during this time of crisis (click here to watch the video).

HOW TO SPEND LESS THAN YOU EARN (or, how not to live on the financial edge)

HOW TO SPEND LESS THAN YOU EARN (or, how not to live on the financial edge)

Is it even possible?

This is hard. I know! We were barely making ends meet, using credit cards for unexpected emergencies, and transferring between cards to keep the interest low.

For a while it was a game and then we got stuck. We missed a few payments and the interest rate jumped to 24.9%! Then we couldn’t make the payments (for the rest of our Financial Disaster Story, click here). Most of us live this way. We drive ourselves, keeping just ahead of our financial obligations. While living at the edge of our financial means has some superficial benefits, the stress can negatively impact our health and relationships and steal our peace and well-being. We need to ask ourselves if it is really worth it.

Fantasy vs. Reality

Someone once said, “Reality is what you run into when you’re wrong”. There is an element of fantasy in living on the financial edge. While it is human nature to hope for the best, we know that something will inevitably go wrong. It could be a dental bill, a car repair, or a pandemic that pushes us over the edge. The impact can be severe if we have no buffer built into our finances.

How did we get to the edge?

Our society promotes living on the financial edge since our economy grows through borrowing and spending. We are bombarded with advertising telling us to buy whatever we want and the availability of credit removes the natural barrier to buying things we can’t afford. We’ve also bought into the idea that the perfect house, the cool car, or the dream vacation will make us happier (deep down we don’t really believe it, but the messages are constant and appealing). Unless we intentionally choose to think differently, we will be swept along into debt.

How do we step back from the edge?

Most of us spend all we earn, every month. One way to stepping back from the edge is to revisit the choices that lead us there. Living on the financial edge doesn’t just happen to us. It is the result of financial choices that did not take into account the unforeseen future that has downs and ups.

– Maybe when you graduated from university, you bought or leased a new car because you needed to get to work. The need is legitimate but there is a cheaper way to meet that need.

– Maybe you purchased a home that your family could grow into when you could have chosen a more affordable house with a cheaper mortgage.

Once we’ve identified the past decisions that are pushing us to the edge we can start to take back control. We can reevaluate those decisions and make changes.

For some it may be selling a house and purchasing a less expensive one, buying a used car instead of making payments, or cutting back on daily spending habits. The goal is to start making financial decisions that liberate some money in order to pay down debt, create an emergency fund, and have some financial breathing room for the next time life happens.

It is possible!

I have a friend who consistently, year after year, lives on 70% of her income. She saves 20%, gives away 10%, and comfortably lives on 70%. She intentionally chose to buy a home that was a little less expensive, rather than the one she could almost afford. She has money to travel internationally every few years, often spending an entire month in another country. She plans ahead and has money set aside for another vehicle in advance. I’ve seen her living this way for the past 6 years. She has peace. She has no financial stress. She is not afraid of the future.

I want to be like her when I grow up! I’m not there yet. But this is where I want to be. Prepared. Unafraid. Looking forward with Hope.

MAKING MORE MONEY? (vs. becoming more trustworthy?)

MAKING MORE MONEY? (vs. becoming more trustworthy?)

Does more money mean less debt?

What is the solution to getting out of debt? Making more money? That is what we all tend to think.

However, the more we make, the more we spend. I have far more debt now than in university. Typically, as our pay check goes up, our spending goes up proportionally, resulting in higher debt. We’ve all heard the stories of lottery winners who, after two years, are back in the same financial position they were in before winning. Obviously, we need to dig deeper to answer this question.

The solution is not ‘more money’

Please don’t misinterpret! Not having enough money is stressful and finding ways to increase your income is a good thing that can bring needed financial security. However, if we want to get out of debt, we need to re-evaluate both our spending habits and our financial priorities. A good place to start is looking at our sending through the lends of: “Am I being financially responsible or “trustworthy” with what I have?”

How do I become trustworthy with my money?

Let’s be thoughtful about how we spend and what we have. Asking ourselves the following questions is a good place to start.

Are we buying things we don’t yet need?

  • Let’s use what we have before buying more. This includes: cleaning products, bathroom supplies, hair care, and items in our pantry. It can be very revelling to assess the value of items stored in our cupboards, freezer, and closets. Typically, we try to eat all the food we have before we buy more. Right now, we do have lots of extra rice and beans in case we need them for isolation.

Are we wasting what we already bought?

  • Let’s not waste what we have. I am still using a deodorant that most people would consider empty. I am scraping it out with my fingernail. There is still a week’s worth in there!

Do we have money tied up in things we don’t need or hardly ever use?

  • Let’s sell things we don’t need. I have some music books to sell. I have started a box of things I don’t need and can sell. As I find things around the house, I add them to the box.

Are we taking care of what we own?

  • Let’s take care of the things we have and be grateful for them. Let’s be glad for our homes and our vehicles and be trustworthy by taking care of them and keeping them clean.

Are we paying off debt and/or saving money?

  • When we “save” money, are we taking that $5 and using it to pay off debt or increasing our emergency fund? “Saving” money and then spending it somewhere else is not helpful.

Are we setting ourselves up for ‘spending success’?

  • Let’s plan our meals ahead of time to prevent impulse spending and paying more than we need to. I shop for groceries once a week. If we don’t have an ingredient, we usually adjust and make do with what we have.

Our goal should be to cultivate a thoughtful approach to spending. Honestly, until I learn to be more trustworthy with the possessions and money I have, I will not handle extra with more care or integrity. When more comes, I don’t want it to slip through my fingers and go to wasteful places. I want to use it wisely, to bless my family, and move us toward financial freedom and living our dreams.

As we become diligent and faithful with what we have been given, we will be trusted with more. This concept is often referred to as one of the laws of financial success. Dani Johnson does a fantastic job explaining this principle and its implications in her DVD series “War on Debt”. Click here to learn more.

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