There comes a time in every season to get real. Now is the time, especially when it comes to your money. When times get tough, it’s not rocket science though we tend to complicate matters. When times get tough in an election year, a rocket scientist doesn’t do much good anyway. 
This isn’t a fear alarm. It’s just a reality check. If you haven’t seen a change in your finances in recent months and years, you’re in the minority. Prices are rising, interest rates are rising, markets are volatile, and some goods are scarce. To be sure, the fear-mongers and doomsayers are rampant. But you can live in peace about your finances. It just may take a little more effort right now.
Here are some questions and conversations I’ve had recently with clients about their finances.
Are we in a recession? Technically, yes, but you tell me. Does it matter what the economists and politicians say? Money is tight, prices are up, and something has to give, right? Politicians and economists can argue about the details, but you are the expert in this matter.
I need to save for… Yes, you need to save for property taxes, a new car, down payment on a new house, vacation, and even Christmas — but not at the expense of today. Look at it like this. If the house is on fire, you don’t want to stockpile water for a fire that may happen later this year or next. If you have extra water in your budget, pour it on today’s fire.
I’m in a pinch. What can I do to stay above water? Generally, there are three ways to build a bridge through a money crisis: Raise income, lower expenses or sell something. You may be surprised at what you can do on all three fronts. Here are some ideas for short-term side hustles. Go through the attic or the garage. I can promise you from experience there are things there you can sell. Cut expenses? In the first five minutes, I typically find $300-$400 extra in someone’s budget. If you want some help with that, email me.
What should I do about my credit cards? Pay them off and give them a break. I know it sounds simplistic, but that should be your goal. Credit card debt is at an all-time high, reaching $930 billion, and more consumers are getting behind on payments. Since a credit card company’s APR is based on prime, and the Fed says it may raise rates another six times this year, your credit card rates will keep going up. Your credit card APR increases when the Feb raises the prime rate. That means more interest payments on unpaid balances.
Here are your first steps: 1. Stay current, and don’t allow fees to add to the problem. 2. Don’t add any more debt to your card. 3. Call your credit company and ask for a lower rate. Typically, most companies can adjust your rate once every six months or a year for customers in good standing.
Want to know more about credit card interest rates? Check this out.
What should I pay first if I can’t pay all my bills? Good question, and it all starts with your four walls: Transportation, shelter, utilities, and food. Think about it, if you can’t get to work, doctors, school (transportation), you can’t feed the family (food), you don’t have a place to sleep, and you can’t turn the lights on, cook, or shower, it will be hard to function. Those four things are the big rocks. Put them in your budget first and pay those bills first. Then you can prioritize the remaining items.
So can I borrow from my 401k? That’s still a hard and fast no. You don’t want to rob your future to pay for your present. Besides, you’ll pay taxes and penalties, which could add up to 25-30%, so it’s not worth it. You can dial down your contributions if you need those funds to either pay down debt or keep you from going into debt. But put away the idea of borrowing from or withdrawing from your retirement. You’ll be thankful you did that later.
Should I believe what the economists and politicians are saying? Believe what you see, not what you hear. What you see in your life is a better barometer of your situation. Politicians — it doesn’t matter which side — will tell you what they think you want to hear. And an election year will always exacerbate the hyperbole because the stakes are higher. You know your circumstances best, so get busy and take action. Don’t wait.
What’s coming next? There are a lot of moving parts. As mentioned above, it’s an election year, so most bets are off. When you add unrest in the world, sky-high inflation, a fed ramping up rates, and various policies, it’s not an easy time to plan. The key: Do not panic. It doesn’t pay to make decisions in high emotional times. Get ruthlessly shrewd with things in your life. Finances, faith, health, and family are where you should hang your hat right now.
In conclusion, it’s not a time for fear, but some of these things may take you outside your comfort zone. For the most part, stay away from get-rich schemes and untried methods. Stick with basics like your emergency fund and paying off debt; don’t try to get fancy. If you need a sounding board, find a coach, a pastor, or someone you trust. There is wisdom in counsel.
Here are some excellent reads.
- Life’s 4 Walls.
- Protect the 4 Walls.
- Inflation Concerns: Avoid these 5 Things.
- High Inflation Concerns: 5 Must-do’s.