When Money Gets Tight, Make These Changes

Here’s what you can do right now to get yourself out of a financial crisis.

In the personal finance space, we are always talking about emergency funds and what you should do if you find yourself in a financial bind. It’s true — future you will be so thankful for that emergency fund you’re building now. If you run into a situation where money is tighter than usual — say, you lose your job (briefly) or have a major car repair — that emergency fund will work wonders, but that isn’t the only thing you should be relying on to get you through. When the cash flow falters, there are a ton of changes you can make to stay afloat.

Don’t stop paying for what you need. It’s important to note that while there are plenty of things you should cut out of your daily expenses, there are things not to be skimped on like food, shelter, and health, says Stacy Francis, President and CEO of Francis Financial, Inc. You should make sure you can fund whichever mode of transportation is necessary to get you to places where you’ll make money. Additionally, keep paying for all of your insurance, including health, auto, and life, says Marci Bair, President of Bair Financial Planning. If something happens, you’ll want to have the insurance benefits to keep the cost down, she adds.

Cut out non-essentials. When you’re in a bind, stop eating out, taking vacations, and shopping for things you don’t need, says Francis. Also, watch those monthly subscriptions — you know, the ones that add up when you’re not watching. Yes, this might mean pulling the plug on Netflix, says Bair, but that extra $12.99 a month in your pocket adds up and could pay for utilities or groceries — things you need to survive.

Keep focusing on debt. “High interest debt will create a future financial nightmare,” says Francis. Even when you’re cutting back on expenses, she says it is crucial to keep working toward paying off any debt you may be carrying. Why? If you don’t pay it off now, you’ll end up paying more later.

Fund that 401(k). “If you are lucky enough to have a job with a 401k, you should take advantage of it as much as you can,” Francis says. In particular, make sure that you take advantage of any matching dollars you’re eligible for. They’re free money. While it might not seem of the utmost importance right now, it will prevent you from a financial crisis once you’re retired.

If you’re still feeling strapped for cash, Francis suggests going back to the drawing board to analyze your monthly expenses. “Create a clear plan of what is truly a necessity,” she says, noting that there are plenty of items we see as necessities that truly aren’t. By assessing what you really need to survive, you will understand, month-to-month, how much money is necessary to live.

Finally, be sure to stay on top of things and take action where necessary. For example, if you won’t be able to pay a bill on time, reach out to the company and see what they can do to help you out. Follow up until it’s paid off and always be polite — that will go a long way. And if you feel like you need to take bigger steps, try refinancing any loans you have, like student loans or your mortgage, or taking out a personal loan to help you get by for the time being or if you feel like you’ve exhausted your other options, a credit counseling service to help you work out a debt management plan.

With Rebecca Cohen

Jean Chatzky

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