Financial Preparedness Is One of the
Most Important Things You Can Do!
Not having enough financial resources to take care of important necessities when “times” are relatively good and the economy has the appearance of being “strong” is hard. It’s even harder when the financial system is in a contraction and your need and opportunities to feed and shelter your family dry up. One of the most important things that someone wanting to be prepared for the future can do is to plan to get out of debt and manage their money effectively, right now!
Two Scenarios – Which One Are You?
Just imagine for a few moments how differently these two scenarios could play out.
Scenario 1 – Jack lost his job today. Besides being blindsided by his employer who had told him a month earlier that he was an important part of the company and his job was safe, his mind now flooded with the anxiety of what his job loss would mean to his family and the mountain of bills he had accumulated over the years. They were living paycheck to paycheck. He wouldn’t have any time to waste. He would need to find a job right away or risk not having enough money to pay his bills, feed his family and keep the house.
Scenario 2 – Jack lost his job today. As he drove home, he wondered if his boss was telling the truth or buying time when he told him he was an important part of the company a month earlier. He would tell his wife over dinner this evening. She would worry. And, to be honest, he would too! Finding a job to replace his current income would be difficult. But, he was glad that he had the ability to be a little picky as he and his wife had built up an emergency fund through saving and sticking to a strict budget. He would have six months to find something that would meet his and his families financial needs.
These are not zombie, end of the world scenarios. These two scenarios are playing out all over the place right now, every single day! Families are having to deal with the realities of job losses, meager paying jobs and lean times. Those that plan and prepare ahead of time will have many more options, and their sanity, if they have to navigate hard economic times.
To Be Successful Your Finances Need a Budget
To prepare your finances, you have to have a starting place. That starting place is a budget. Creating a budget isn’t hard, but it does take a little bit of time to put it together. Luckily, I have created a resource that will help you. You and your spouse just need to sit down and plug in your specific needs.
Here is a link to a Google Sheet (an Excel file is at the end of this article) that will allow you to plug in the numbers and do the math for you. But if you would like to work it out on paper and pencil, download the PDF at the end of this article.
All of Your Expenses – The key to making your budget a successful tool is that you need to include all of your expenses. This includes things that you might not think of like, going out to eat, individual spending money, that candy bar you bought when you filled up on gas, EVERYTHING! Don’t forget to create a budget category for preparedness.
The reason you need to include everything is that it all adds up! Every cent, every dollar that goes out, is accomplishing something. Is it accomplishing what you want it to do? The second reason you want to account for every cent is that the extra money that you have, that isn’t paying expenses, you want to pay down debt and start building an emergency fund.
So, it is important to account for all expenses and have it down on your budget. At that point, you can see what is coming in and going out very easily. You might be surprised how much actually comes in and that you can’t account for it at the end of the month.
You Need an Emergency Fund and You Need to Pay Down Debt
After creating your budget, the next step is to see how much money is left over. That money needs to be used to first, put away a small emergency fund to get you through any small financial hiccups. After you have $500 – $1,000 saved up, then you can start breaking the chains of indebtedness.
Dave Ramsey has done a great job of promoting his “Debt Snowball” to help people understand paying down debt. If you are serious about getting out of debt and becoming financially healthy, you should read his book, The Total Money Makeover. Here I’ll share this video where Dave explains the Debt Snowball.
How Are You Going to Increase Your Income?
As you are actively working your budget, saving for an emergency fund or paying down debt, you should be looking for ways to increase your income. You should want to bring in more money to pay down debt and build your emergency fund more quickly.
Here’s the thing…. Make this your hobby. Make it fun! Don’t spend your evenings in front of the idiot box watching who knows what!
There are so many things you can do here. You can have a garage sale, put items that you don’t use anymore up on eBay or Craigslist. Pick up a second job. Start a small business selling items you make, being a handyman, babysitting, or providing some other service. One thing that you can ask here is, what do you love to do? How can you turn that in to a way to make money? You would be surprised the things others do to bring in extra money. And you can do it too!
When you make a budget, pay down debt and have an emergency fund, you will be better prepared than most people to weather a crisis that involves your finances. Becoming financially prepared is not hard, you just have to be disciplined. But the pay-off, later on, is huge! Just think about the relief you and your family would feel if you experienced a financial hiccup, but you didn’t have to worry like most Americans do. It’s time to get finanially prepared.
* Download the SAMPLE BUDGET. Google Sheet [Dropbox Links: Excel Sheet and PDF]
* Start Your Emergency Fund
* Prepare Your Debts in a Debt Snowball and Start Paying Down Debt
* Increase Your Income: Sell Stuff and/or Get a Side Hustle.
* Read – Economic Tweaks: Changing Our Behavior on the Spiral Downward!
Survival for the Common Man is a series of articles for those who are new to prepping or those who never really felt they had a good foundation to start.
Why Survival for the Common Man? I love to gain experiences in wilderness survival, bushcraft, homesteading and “tactical” preparedness. But the truth is, most preppers are regular, everyday people (the common man). We live in the suburbs, go to our day jobs, and attend school and family events. But we also see the world around us and see the need to be prepared, to make sure our family is safe and able to thrive in times of uncertainty. There are more of us than you might realize! This series is for you!
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Good advice. Debt is so easy to fall into. It takes vigilance and determination to stay out of the pit.
Living beneath your means is a challenge, but it can be done. When my wife and I were young and pre-children, we tested our ability to live on just my paycheck by putting all of hers in the bank for at least a year (I think it was longer). That became the basis for the downpayment on a house AND forced us to scale back our lifestyle to fit the single paycheck (which, I should point out, was NOT particularly generous)
Budgeting during the child-rearing years was a challenge too, but do-able. Once the kids were grown and gone, the only debt we had was the mortgage. We helped both kids through college, but they also had to work too. While my son was not quite as diligent, my daughter graduated with minimal (almost no) debt.
As my wife and I approach retirement years, we’ve resumed work on a tighter budget to make sure we can continue to live within our means on the reduced income of SS and retirement funds. It will be lean, but for the past few years we’ve been ramping up for that by living within that leaner amount NOW and banking the extra.
We have a moderate emergency fund (3 months of pay) and some other savings (like to replace the wife’s 17 year old car when it finally gives out).
I’ve been collecting durable “prep” stuff now, while there’s the income for it, having in mind NOT having to buy it during the seven-lean-cows times.
It’s tough saying ‘no’ to myself. Lots of things I’d like to simply buy. A strict budget is like a tyranny to which my rebellious human spirit chafes.
Good points Mic. I’m in the same arena with kids in college. I don’t want them to get out with a ton of debt. That’s not a way to start in life.
Keep up the good work on the budget. Everyone should be so disciplined.