Ways to manage your finances in uncertain times

A brief look at economic indicators shows a great deal of uncertainty. Consumer confidence declined sharply for five consecutive months before improving in May. Stocks are rising and falling like a rollercoaster. While inflation has slowed, some retail stores are announcing price hikes and downgrading profit expectations over the next several quarters. All this news can impact our psyche as well as our wallets. What can you do to bring a little more certainty to your life? Consider these steps as a starting point. 

Focus on what you can control

Uncertainty can affect the decisions you make about spending, saving and even earning (e.g., feeling uncertain about changing jobs or asking for that raise). Instead of worrying about all the things that are out of your control — the price of food or gas, the low interest paid on savings accounts, the high interest charged on debts, and/or the effect of stock market ups and downs on your retirement account — focus on what you can control. 

Try this exercise. Write a list of all the things that you feel uncertain about, and pick the one that worries you most. Next, draw three circles: one large one, another one inside the first circle, and another circle inside the second circle. In the outer circle, write all the things that you have no control over. In the middle circle, write the things that you might have influence over; for example, if you are concerned about the cost of groceries, is there something you can do to make it less costly? In some cases, there might be no way to have influence, so move to the inner circle, and write down what you can control.

Here is an example:

For the things you can’t control, let them go. For the things you can influence, do what you can. Focus your main energy and decision-making around the things you can control. 

Increase your savings

Fear of the unknown drives much of our behavior when we’re feeling uncertain. One of the best things you can do when feeling uncertain is to plan to mitigate the impact of your fears. Are you concerned you might lose your job? Worried that a car or house repair will cause you to increase debt? If these happen, you can reduce their pain if you have savings in place to help bridge any gaps.

If you currently have no savings, decide what is most important for you to save for. If it is to replace income if you lose a job, start working toward saving three to six months of non-discretionary living expenses. These expenses are for the things that allow you to live with health, dignity and safety — i.e., shelter, transportation, utilities, food, insurance, etc. If your goal is to make sure you can cover a car or home repair, how much will that cost? How long will it take to save that amount? It can be helpful to start with a smaller amount so that you can get yourself into the regular habit of saving.

Follow these steps for building savings: 

1. Decide what you are saving for.
2. Determine how frequently you can save (payday is the best time to save).
3. Decide how much you can easily save each pay period.
4. Automate your savings. Set up direct deposit from your paycheck to your savings account.
5. Adjust the amount down if it stretches your budget too thin, or increase the amount if you aren’t making progress as quickly as you would like. 

If you are currently not working or have variable income, you might need to start with a very small amount and save weekly. No amount of savings is too small to matter. If you set aside $5 a week, you will have $250 in one year! 

Make a plan to reduce debt

If you’re paying on credit cards for past decisions, put together a plan to pay off your debt once you have a minimal amount of savings. When paying off credit cards, consistent payments are key. Start by listing all your debts, and include the balance, interest rate and minimum or monthly payment for each. If you have multiple debts, choose your priority debt to pay off. It could be the one with the highest interest rate debt, the smallest balance, or whatever criteria will provide the highest motivation for you. Once you have listed your monthly payments, identify any extra amount you can put toward your priority debt — even $5 extra can make a difference! Add that extra amount to your priority debt each month, and continue to pay the monthly payment on your other accounts, Keep the payments the same each month instead of following any minimum payment schedule on credit cards.

Here is an example of what that plan might look like:

Once your first debt is paid off, add the entire payment to the next priority debt. This will take some time. Both saving money and repaying debt are more like marathons than they are sprints. Stay determined: you can do it!

Other tips

You might want to take further steps to make your debt more affordable while working to pay it off. Try some of these: 

1. Shop around for a credit card with a lower interest rate or balance transfer offer. Pro tip: Credit unions typically offer lower interest rates than big banks. If you’re a credit union member, check with them first!
2. Once you’ve found a good rate, contact your current creditor to request that they lower your interest rate. Let them know about the new rate you have found. If they say no, go ahead and transfer that balance to the lower rate card.
3. If opting for a balance transfer, make sure you can pay off the balance within any promotional period. If not, you will end up back where you started, with a high interest rate.
4. Explore other options to eliminate debt, like our Debt Management Plan (DMP). A DMP is a strategic way to pay off credit card debt. Usually you will have lower interest rates, and you consolidate your payments into one monthly payment instead of multiple payments.

Our certified, nonjudgmental financial counselors can explore options to reduce your debt, increase your savings, and work toward improving your financial wellness. Call 888.577.2227 to schedule a free, confidential appointment, or book an appointment now.

Author Shannon Doyle is a program manager for Financial Partnerships and Education with LSS Financial Counseling.