nicole lapin wants to help you understand the new normal – and what it means for your wallet.
I’ve been writing about and covering business and finance for a long time and I can honestly say, this “new normal” with our economy is something I never expected. But while I or all the economists and business pundits trying to make sense of this can’t control the economy, we can control ourselves.
Here are 4 things to remember about your money right now.
number one: It’s raining!
You know the “rainy day” everyone and your grandma has talked about? Well, yeah. It’s raining. If you’ve been able to save for an emergency fund, now is the time to use it. I’ve suggested in the past to try and aim for six months of expenses (of just the Essentials) if you can and ideally closer to a year if you have a precarious income like a real estate broker or an actress. I fully get that this is hard to do and if you’ve just had your income or livelihood cut, then just focus on the now. But, if you have an emergency fund, this is the time to use it. Don’t let this be the good wine or dress you save for a “special occasion” and even when that happens you don’t drink it or wear it (respectively). This is the rainy day or emergency you’ve been saving for so don’t have guilt spending it if you need to. You will get it back. Maybe not tomorrow, but it never rains forever.
NUMBER TWO: 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.
NUMBER THREE: Negotiate Everything.
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.
NUMBER FOUR: 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.
There is so much uncertainty in our daily lives right now, and it’s continuously changing and getting further away from our normal. Taking charge in the ways that we are still able can be empowering and help to reduce the anxiety and stress that we are all facing. It’s imperative that during these difficult times we focus on our health and our wealth, and try to come out of this crisis as unscathed as possible.
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.