These are not typical times. Regardless of where you are in your financial journey, the times demand our attention and action. Recently, we discussed the 5 things you should avoid during high inflation. Today, we present the 5 must-dos. While it is not an end-all list, it will help you navigate these times and focus your attention.
1 Pay down debt. If you add the amount of interest you’re paying to the inflation rate, you’re losing twice. This is true in normal times (what are those anyway?), but even more essential in times of crisis or high inflation. It’s an excellent time to put every extra penny toward your debt. Sell something if you need to, but knock it down quickly. With interest rates rising for every sort of credit, you’ll want to explore how to get rid of — not add — debt.
2 Invest in yourself. Yes, that’s right, you! You are your most valuable commodity. Take an online course (many are free!), learn a new skill, or work extra hours in another department at work. Be creative, but learn something you didn’t know before. Read a book (get my reading list on Thursday), watch a YouTube video for that project you’ve wanted to do, and check with your local school about a night course. Technical schools are prevalent and often offer the opportunity to audit classes. Invest in yourself, and you’ve raised your skillset, knowledge and value when this craziness ends.
3 Get a second job. Your paycheck has taken an enormous hit. It’s like taking a 10% pay cut right when you don’t need it. There are tons of side jobs you can do. Take a look at our list of side hustles. Yes, it will take extra time, but it will reduce stress and help replace your income. Ten hours a week can make a huge difference.
4 Summon your financial coach and financial advisor. An expert set of eyes is always helpful. These people are paid for times like these. If you’re already paying them, seek their advice to ensure you optimize your options. What’s the difference between an advisor and a coach? A financial coach will help you with your behavior with money. Learning to manage your money is 20% head knowledge, so a coach helps you with the 80% behavior part of your journey. Your financial advisor is responsible for your money’s behavior in investments. Both are critical to success, especially in helping plan your future. Schedule a free review with Chip. Don’t have a financial advisor? Email us, and we’ll connect you to one of the best in the country.
5 Plan, plan, plan. Getting ahead with your money starts with a solid plan. Hedge your bets and give yourself a cushion where you can. That means bolstering your emergency fund, evaluating your budget and reviewing your insurance plans. Is your emergency fund large enough? We recommend $1,000 as a standard amount, but you may want to consider upping that to $1,500 or $2,000. Not being able to pay for an emergency can kick off a snowball effect you don’t want to start, so protect yourself. Talk to your insurance professional. Review your discretionary spending, including subscriptions, eating out, hair cuts, extra trips to the store and unnecessary repairs or upgrades.
Bonus. If you’re investing, don’t stop. If you have cash lying around, invest it somewhere, somehow. That may be as simple as a money market or a decent savings account, but don’t leave it sitting around in your checking account. And you don’t need to hold onto $20,000 “just because”. Pay off debt if you have it, or invest it. You can “invest” in your home, yourself, an IRA or something else that will give you a return. Here are some ideas.
The Misery Index is rising again, though it has a long way to go to catch up to 1980’s 21.98%. Although it stands at 12.2% today, it is expected to continue upward through the remainder of this year. Don’t fret. Just plan.
Finally, understand this: We aren’t suggesting that you initiate a full-on bunker approach, but reviewing, anticipating and planning the rest of your year has advantages that will help you stay ahead. You can have peace amid the storm if you will prepare. Let us know how we can help you.