Surfing the Economic Waves

It's so easy to panic these days when looking at my bank account. I mean, when I turn the news on, no matter what channel I watch someone's telling me about the doom and gloom ahead. Beware the government shutdown! We're stealing your grad student financial aid, good luck academics! The stock market's dying. The sky is falling! The sky is falling!

Ugh. I know, that's a very technical term, but when you are given the message that impending financial doom is sitting there waiting for you around the corner, it kind of makes it so you don't want to get up in the morning. In fact, it kind of makes you want to hide your head in the sand and give up on riding the surf board.

If that's not enough, everywhere you look for advice, the advice seems to be geared toward those who have money and assets and a whole bunch of other fancy-schmancy financially secure things that the average person in our country does not have. How out of touch are the people in power who are giving advice anyway? A recent finding declared that one in six people lives in poverty in the United States. Poverty. As in, not making enough to even meet the federal poverty level. That's a lot of people. That means if you're thinking about a baseball team, without a designated hitter, four of the people on that team will be living in poverty. Yikes!

So what's the best advice for the average American? The person who might, if he or she is lucky, have a bit of a savings account and a lot of credit card debt? Don't panic and do the best that you can with what you do have.

While you have David Bach talking about the latte factor, Trent at the Simple Dollar is talking about how to cut back on expenditures and someone else telling you to get a second job, these aren't always practical when you've already cut back on coffee, you only eat PB&J sandwiches, and you're working 20 hour days between three jobs.

Take a deep breath. While it really feels like it, being broke isn't the end of the world. There are millions also in your shoes. Yes, it sucks when you have to make hard decisions - like do I buy health insurance or do I pay rent? I know, because I've been there. However, it's not the end of the world, and when the blood isn't pulsating hard through your head because you're having a panic attack, it's much easier to come up with a reasonable solution and determine a course of action. You cannot possibly solve your financial woes when you're sitting in a pit of despair. If you have a couple bucks, go to the corner store, treat yourself to something. Yes, David Bach is rolling his eyes at me, but if you feel totally deprived right now, you're going to spend bigger later when you have a little extra money. Again, don't panic!

Now that you've got a coffee or giant soda or pack of M&Ms, I want you to return to the area where you do your finances. Maybe it's the table or the couch or a desk. Take a deep breath. Really, you're going to be okay. I've known lots of people in the same situation. Get out all of your financial processing stuff. The bills, the statements, the collection notices - stack them all up. Take each item, one by one, and record it in one of three columns "Income," "Priority expenses," "I'll get to it when I can expenses." Things like your mortgage or rent, electric, water—those are your priority expenses.

While it stinks to have to choose between bills, and of course you should always pay your bills on time, when the choice is between buying food and paying a credit card bill, you should clearly buy food—especially if you have kids. When you're pinching pennies, it's so important to prioritize your expenses.

But I'm going to add a little advice here. While some financial gurus will tell you that you should never purchase coffee out or go out with friends or spend money that doesn't have to be spent, I'm going to say something else. If the $3.95 you spend on a latte while out with a good friend leads to less stress and is not put on a credit card (and it's not an everyday thing), do it. Just like a diet, if you restrict yourself too much, as soon as you have extra money instead of using it to catch up, you'll wind up splurging on all the things you've felt deprived of.

To continue the diet analogy, financial change is a lifestyle change—and it's best done by taking baby steps. Just like you wouldn't go out and run a marathon if you've not been on a walk in ten years, you shouldn't try to apply every piece of advice you learn at once.

I like the idea behind Gretchen Rubin's Happiness Project. Add one habit to your month that will make you more financially healthy in the long-run. For instance, perhaps you'll want to cut back on your expenses. Instead of trying to cut out things all at once, each day, try to find one way you can save money.

For example, do you really need a venti latte, or will a tall latte do the trick? Maybe you'll spend a month tracking every expense. The next month, perhaps you could make it your goal to pay extra on one credit card. Another month, maybe your goal could be to earn an extra $200 to apply to old bills. Whatever it is, keep it small and realistic, and you'll be much more likely to meet your goals and continue to make progress.

While it's tempting to look for a solution right now, to all of your financial problems, it's too easy to get overwhelmed if you try to take it all on at once. Make a list of what needs to be paid, prioritize it, and take care of it as best as you can.