Over the last few weeks, I’ve read countless stories and had many conversations (online ones, to be clear) with readers, family, friends, members of my community and others about how this period of social distancing is affecting their life.
There’s a lot of hardship out there. Many people have lost their jobs. Many people are dealing with the loss of a loved one, or the serious illness of a loved one. People are dealing with anxiety and melancholy and with a lot of adjustments of all kinds.
Yet, along with those stories, I’ve heard some really good news, at least from a personal finance perspective.
Again and again, I’ve heard from people who are now practicing social distancing that this period has pulled them back from a financial precipice, sometimes one that they didn’t even realize they were on.
This is due to several things coming together at once.
For starters, over the last month and a half, a lot of people have been put in a position where their non-essential spending has been cut drastically. We can’t go to the shops. We can’t go to restaurants. We can’t go to bars. We can’t go to the movie theater. Our food spending has transitioned almost entirely to buying food from the store and making it at home.
Furthermore, many of us are simply staying at home and that changes spending, too. People aren’t getting coffee on their way to work, for example. People aren’t driving, which is saving money on gas, oil changes and other maintenance.
In some cases, like ours, expenses you would expect to go up haven’t gone up that much. Our grocery bill certainly has, but perhaps not as much as you might expect because we’re doing things like baking bread. Our energy use most likely has flattened or gone down because we aren’t running heating or cooling during the day and are keeping our home the same temperature.
Even if people still have a job, many of them have been shocked by the rapid spike in unemployment, making a lot of people concerned about the long term future of their own work. Will they be unemployed soon? What can they do to help brace themselves against such an occurrence?
These changes come at a time when, before this all happened, roughly four in five Americans were living paycheck to paycheck. Most people didn’t have enough savings to sustain them through missing a single paycheck. Often, people reached that state through a sense of security – their job was stable, things were good in the economy, there were lots of things to do with that money.
All of those factors changed in the course of a month. Many have lost their jobs and others find themselves in a less stable situation, the economy is clearly entering a deep recession, and there are a lot less interesting things to do with one’s money.
Add all of that together and what’s the result? A lot of people are pulling themselves back from the financial edge, and many of them are realizing just how close to the edge they were.
Many people are finding themselves with a little extra breathing room in their checking account — or a lot of extra breathing room — and that’s an enormous relief in the midst of this change. Many people are using that money to start an emergency fund (here’s a great guide for getting started), to pay off a credit card debt or something else to bring some financial stability in their life.
If I have one piece of advice to the many people who find themselves in this boat, it’s this: don’t let this be a singular moment in time. We may pass through this period and find ourselves on the other side with businesses reopening and things returning to some form of normal, but this is a moment not only to pull yourself back from the financial edge, but set yourself up to stay there.
First of all, consider what parts of “normal” are really worth getting back to. What routines in your life before this moment have exposed themselves as being completely forgettable or, if you do recall it, rather empty of any desire to go back to it? If you’re not missing a routine, don’t go back to it, period. Trim it from your life.
If you’re behind on any bills, get caught up on them. Getting out of a cycle of late fees will not only directly save you a ton of money, it will also help you to start improving your credit, which means that you’ll be able to get lower interest loans in the future for things like your next car or a house down payment.
If you’ve set up an emergency fund, keep it funded, automatically. Just keep an emergency fund in a savings account and fund it with a small automatic weekly transfer from your checking. Then, forget about it until an emergency hits. Don’t turn it off. Don’t even think about it. Let it build until you really need it, and you will be so glad it’s there.
If you’ve paid off a credit card, throw it in a drawer and try living without it for a while. Delete that number from your online accounts, too, so that you don’t use it for online spending. Instead, use cash and your debit card as your only spending tools for a while.
What you’ll find is that, if you put this stuff in place now and hold onto it as things return to normal, you’ll stay away from that financial edge. Not only will you not find yourself in a financial panic if things go awry, a lot of the little worries in the back of your mind will simply vanish. If your car doesn’t start, it’s not a panic moment. If you lose your job, it’s not a big deal, at least not right away.
Some people will take advantage of this moment in time to pull themselves back from the brink, eliminate a few wasteful routines and start establishing a real foundation for themselves. Others will let this moment pass by like sand through their fingers.
Right now, this moment in time has given you two paths going forward, and you get to choose. Which one of those two options will you choose?
If you choose the path of financial stability, you’ll never look back and you’ll never regret it.