Create a Spending Plan.
Normally, I suggest sticking to the 3 Es: Essentials, Endgame and Extras, with 70% of your gross take home pay going to the Essentials (food, housing, transportation, etc.) and at least 15% going to your Endgame (investments, savings, etc.). I also suggest to never skimp on allowing for something in the Extras category (latte, mani/pedi, nights out, etc.) because allowing for small indulgences will keep you on track and keep you from bingeing later on. But, we are in a new normal for the time being at least where a lot of the Extras don’t make sense or simply aren’t even available if we wanted them to be or could afford them. With that said, I suggest limiting Extras to 5% of your overall Spending Plan, looking for lower-priced self-care options or free indulgences (hello, hiking!). Then I would aim to cut down on Essentials (by negotiating and/or reining in costs) to 65% while aiming to squirrel away more. When the state of the economy comes back to normal (and it will), it might be a good idea to live below your means anyway, especially if you found yourself unprepared with an emergency fund for this crisis.
Remember: Debt happens.
If you have a mortgage (debt), this is a great time to look at refinancing. If you have a mortgage that is at 4 or 5%, it may be too high. So, now is a good time to look at getting it down. If you have an adjustable rate or balloon mortgage, try to lock it down with a lower, fixed-rate mortgage. Debt is traditionally the only four-letter word I don’t like but, it’s there for a reason and if used responsibly, it can be your hero (one of my favorite four-letter words!). Plus, if you have been working on stellar credit all along, you can reap the benefits of lower interest rates when you need them (aka now). If you take on credit card debt, that’s okay. Getting into debt during an emergency is fine as long as you have a plan to get out of it and add steady repayments into your Spending Plan. Truth be told, I got into credit card debt for stupid reasons (wanting a cooler wardrobe), and I came up with a plan to “prioritize to pulverize.” So if you get into it responsibly, you will get out of it the same way. Remember, it’s a tool and just like a hammer, it can be used to build a house or destroy it. It’s all how you use it.
From your car payment to rent payment to utility payment…ask for all your bill collectors to work with you. We are all in a similar situation so the truth is, not all bill collectors will hook you up. But, what I do know for certain…the answer is always “no” if you don’t ask. I also know this for sure…no one is going to call you with a break in your payments (unless mandated by the government, of course) so you have to be proactive about getting bills and payments down.
I know it can feel uncomfortable to talk about money right now with your financial advisors and clients. Well, it can always feel that way but more so now. But, it’s important to make sure you’re checking on the health of your wealth and maintaining its strength as much as possible right now.
Nicole Lapin is the New York Times Bestselling author of Rich Bitch and Boss Bitch. She is the host of the nationally syndicated business reality competition show, “Hatched.” She has been an anchor on CNN, CNBC and Bloomberg. Her third book, Becoming Super Woman, is out now. Sign up and learn more at The Money School.