0219: How to Conserve Cash & Save Money During The Pandemic

EP 0219: How to Conserve Cash & Save Money During The Pandemic

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In this episode, I want to discuss preparing your finances during a recession and how to conserve as much cash and capital you can during this time period. It's not purely a divorce topic, but it has some general financial discussions in here. And there's some things I want you to think about. As I'm recording this, there's something like almost 30 million American adults out of work. The unemployment rate is high. A lot of states have been locked down, and some are slowly starting to reopen, but the economy has fundamentally changed. And just a few months ago, at the beginning of 2020, there was a great economy, and then that changed in the span of about a week or two. And a lot of people have lost jobs or are on unemployment or some combination of those.

And when you're on a budget, regardless of your lifestyle and your income, oftentimes a big decrease like what has happened recently can completely change your lifestyle, your budgeting, your plans, and it can be hard at a certain point if you've exhausted your savings or are getting close to it to figure out ways to conserve some additional money and give yourself added financial flexibility as you try and keep up with the relevant payments that you may have.

And so I want to go through a few different strategies, five specific strategies to consider when it comes to this environment and some ways to improve your financial picture, particularly if your income is down, but your expenses have remained the same or your expenses have even increased given everything that's going on. And so I'm going to go through five things and I'm just going to start them now.

The first is to check and understand your spending. You should have a very good handle on your expenses. If you haven't completed a financial affidavit or statement of net worth, oftentimes they ask you for your monthly expenses. One of the things you should be doing is really understanding what those expenses are, how they look, what can be cut from your expenses. I look at every transaction every month and I go through and I say, "Hey, do all these transactions look good? Where do I spend too much? Could I cut something here or there to make sure that I'm not spending too much?"

And when your budget is tight, you have to realize that even small things add up. I'll use a very simple example, is if you pay $10 a month for Netflix ... I don't know the exact Netflix price at the moment, but let's just say you pay $10 a month for Netflix, and that's $120 a year over five years, that is $600 of spending on Netflix. I always look at those small subscriptions as a five year commitment, and you can realize that $10 a month can add up pretty quickly, much less if you have an expense that's $50 a month or $120 a month or more. And so you need to really think about those expenses and what you may be able to cut.

The second thing is if you have debt of any kind, be it a credit card, student loan, personal loan, mortgage, whatever, you can negotiate with your lenders. Under normal economic environment times, people were not as willing to defer or adjust your payment schedule, but now given the millions of people in very tough situations, and you may be one of them, there are ways to lower your payments in the short-term so that you have some flexibility and in the long-term, you're going to make up for it. But doing and cutting what you can in the short-term can be helpful.

When it comes to a student loan or a credit card or personal loan, you can pay ... Sometimes they'll let you just pay the interest. Maybe you can't pay the principal balance, so if you have ... I'm just going to make up a student loan, for example. Well, let's say you pay $1,000 a month on a student loan. Well, 500 of the $1,000 might be going to interest, and 500 of that $1,000 may be going to the principal balance of that loan. And if you don't have the same amount of income coming in, you can say, "Hey, can I maybe just pay interest only for the next six months, the next 12 months until I can get back on my feet?"

And most lenders are very willing to do that for you because I mean, they want a payment and they don't want you to stop. And it's better for them if you pay some over paying nothing and it's okay ... They'll be happy if you carry a balance for six months, so long as month seven or even month 12, whatever it is, you start paying that as normal again, but if you just stop payments altogether, that actually hurts them quite a bit as well. So people are willing to negotiate and adjust the payment schedules today, so whatever kind of debt you may have all the way to a mortgage or a credit card or anything in between, call the institutions, tell them th...