Top 5 Ways To Battle Financial Crises With Confidence
Written by
Caitlyn Moorhead
Edited by
Gary Dudak
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If your favorite part of your morning routine is thinking about when you get to go back to bed, you may be skipping a few key details on how to get yourself out of stressful situations and back on the right financial track. Fortunately, there are steps you can take to bounce back from any unexpected hardship, all with your favorite show on in the background on Netflix.
Here are the top five ways you can confidently fake it until you make it when handling any financial crisis.
No. 5: Saving 10% in Time Saves You 9 (Years of Outliving Your Nest Egg)
Mindless automation is the key to removing human error, or at least temptation. If you’re financially able to, focus on contributing as much as you can to retirement savings. Scrolling through any financial wellness website will tell you that most experts recommend allocating at least 10% (preferably 20%) from each paycheck straight into your retirement plan.
If you’re feeling frosty, consider signing up to auto-increase your 401(k) contribution each year. Make your workplace work for you, as you can automatically set this up with contributions that come directly from your paycheck. If you don’t have access to a workplace plan or are not happy with the plan offered, you still have other options, such as Roth IRAs, so don’t do what you really want to do, which is, of course, procrastinate.
No. 4: Don’t Bet Against Your Life Span
It may feel ghoulish, but you have to think about how many years you’re going to live. Obviously, one hopes for forever, which would be great only if you have a guaranteed lifetime income source that contributes to your financial resilience. However, if you’re confident you don’t want to outlive your nest egg, consider investing in annuities.
For example, if you have an annuity option in your workplace plan, which can be converted into lifetime income at retirement as promoted by the Secure Act, put part of your 401(k) contribution into this option. You can also purchase annuities outside of a workplace plan.
No. 3: Make Sure All of Your Emergencies Are Well Funded
If you haven’t been saving for a rainy day, then check the weather forecast, as it might be pouring. Ideally, the money you have in an emergency fund could help you gracefully navigate any financial crisis instead of falling on your face. To avoid the latter, have three to six months’ worth of expenses stowed away in an emergency savings account.
If you don’t have an emergency fund yet, or only have a small one, snap to it and focus on building one up. Aim for a separate no-fee, interest-paying bank account and set up direct deposit from your paycheck of whatever you can afford each pay period.
No. 2: Stop Using Your Shopping Cart as a Therapist
To build your fund faster, consider focusing on ways you can cut expenses and channel these extra dollars directly into your savings. Yes, swiping your credit card for something new and shiny can feel like it’s filling the void in the cavernous space where your heart used to be, but budgeting can also be fulfilling.
Track your spending to see where you can cut a subscription you don’t use or switch your phone plan to save more each month.
No. 1: Remember That Debt Is Not a Cat; You Can’t Win It Over by Ignoring It
And now, the no. 1 way to disassociate from financial crises with confidence is … getting out of a financial hole any way you can. Paying down debt was one of the top contributors to feeling financially resilient. Start with the avalanche method, which means paying down debts with the highest interest rates first.Â
However, if paying off a couple of small debts with very low balances seems less overwhelming and more motivating, give the snowball method a go. Knocking down even a few credit card bills with a lower interest rate can help you gain confidence in your ability to pay off debt.
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