This may be the hardest part of a financial crisis. It’s officially over – In my case, I got a new job: I start next week and I’m very much looking forward to it. I’m also, frankly, looking forward to getting a real paycheck again!
Unemployment saved me, certainly, and I am most appreciative of the safety net it provided. It would have been an awfully long way down without those benefits. I was fortunate, too, in that I did really want to go to school, and was able to access a federal program called the Worker Initiative Act. This paid my modest tuition and less modest books at the community college, and allowed me to collect unemployment while I was “retraining” for a new career.
I’m just past the midpoint of the last full semester. One more course this summer and I’ll have the AAS in Business Administration. None of those things would have been able to happen without a robust network of assistance, options, and community and personal resources.
I got to breath, grieve, regroup, focus on the future, and keep my house and car… by the skin of my teeth, but I managed.
My new employer is willing to work with me some scheduling accommodations so I can finish in early May – saving me from that tough choice of finishing school or grabbing hold of an opportunity. I’m not being forced into that unpalatable set of choices.
So, with all this good news I’m relaying, why do I say this is the hard part? Well, the crisis is over, and that means a whole bunch of assumptions and beliefs we hold about how things are supposed to be get triggered – crisis over? Cable TV back on? Paycheck coming? Eating out more often? Work wardrobe needs reburbishing? Ooohh, new clothes and, wait for it, new shoes…..aaahhhh.
But the difficult reality is that there is no money to these things for a while. Breaking even will be triumph enough for the first few months. So much has gone unattended. Things have been back-burnered, let slide, pushed down the line…. whatever your favorite cliché. To not leap into fresh disaster (another food metaphor: from the frying pan into the fire) takes a very simple task: Planning….
Okay, I take it back, it takes a very complex task: Planning…..
I really is a little of both. Here’s what I want: I want everything that’s been on my wish list for the past 22 months. I want several pairs of new shoes, I need a tune up and new tires for the car, I want home repairs to the floors and gutters, and heavy yard clean-up, and a better television (you know, for with that new cable service. I need to get to the dentist and want to tune up my sewing machine. I want to rebuild my tattered IRA account start the climb back up from crisis to stability.
This is a lot of expectation to lay on a simple little paycheck. Will this suddenly turn me into a master planner, able to exert unnatural discipline in the face of temptation? I’ll craft the perfect, magical budget that will simply follow itself, that’s how perfect it will be.
Now, back to our reality check: I didn’t win the lottery, I got hired by a lovely local nonprofit (I won’t mention them by name since I don’t yet know their social media policies).
Please allow me to proclaim again, in all seriousness, I am extremely fortunate. I will enjoy the job I’ve gotten, my skills and talents will be appreciated, I’ll have the magic phrase: paid medical benefits. I will clearly be better off within a few weeks of my start date.
But then what?
I need – more than all those other wants and needs spurting out above here – I need to get a plan and prioritize what I’m going to do.
A Whole New Kind of Pyramid Scheme
Here’s where Financial Literacy 101 helps. Begin at the biggies – you know, rent or mortgage, utilities, car payment, regular medical expenses, insurance and so forth. Write down what the cost is each month for the items you know, put a guess in the spots where you don’t know and we’ll return to them later. Get a broad idea of how much it costs to live each month. We’re looking for the basic nut – the amount you must have to stay safe and warm and dry. These items all stay pretty much the same each month, so the financial pyramid now has its base. The next level is the regular expenses that aren’t the same amount all the time – food, gas, usage-based utilities, etc. These make up the middle chunk of the pyramid. The amounts vary, but they happen each week or month and you can, with a little review of your spending, develop a pretty keen sense of how much these represent each month. NOTE: this is fertile ground for trimming expenses down the line.
Finally, the top of the pyramid. This is the chunk that breaks off and slams you periodically. These expenses represent the apparently random ones that are actually startlingly predictable, but on a longer curve than monthly. Over the course of a year, these expenses are bound to occur. The amount, timing, and particulars may change, but they happen. Imagine driving a car that never needs repair and maintenance? If there were such a thing, we’d all be riding in one.
Here’s one of the big secrets of budget planning: everything we own, everything tangible, is subject to breaking down, wearing out, or becoming obsolete (just think rotary phone if you doubt me). So we’re going to always be in the midst of fixing or replacing one thing or another. Holidays and birthdays roll around with boring predictability (so why do they always take us by surprise?) The question is often pay now or pay later. Regular maintenance reduces long-term repair costs. Setting aside money in advance each month towards these costs reduces stress, credit card interest, late fees, and insanity.
Not a Quick Fix
It can easily take a year of building reserves for these irregular and periodic expenses before you can draw against your own savings to meet an “unexpected” expense. Just keep socking the allotment you’ve determined aside, again and again, until it works. There’s a great moment of pride and relief the first time your car breaks down and it’s like, “so what, big deal. I’ve got the money…. I just need a ride to work while it’s in the shop.”
I haven’t even started work yet. I won’t have a paycheck for several more weeks. I have new expenses to consider and old ones to whittle away at. But all a person can do it begin. Gather the information starting now. Write down the expenses, keep the receipts, think before you buy – oh, and never, never shop when you’re hungry.