Vol. 8 - What to Prioritize During a Crisis
In this episode, we are addressing what to prioritize during a financial crisis. We cover:
Goal setting
Cutting expenses
Investing
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TRANSCRIPT:
Naseema McElroy (00:01): All right. So welcome to our new series of our conversations with the CFP. I'm super honored to have Leisa Peterson joining us, so where we talk about money issues that are important to you, but not just from my perspective but from the perspective of a fabulous, the certified financial planner. So welcome Leisa.
Leisa Peterson (00:23): Thank you. I'm so happy to be here again.
Naseema McElroy (00:26): Yes, yes, yes. So Leisa has been on the podcast as a guest and then our connection was just so great. I just couldn't stop. I just wanted to have more of her. So yeah, so now we get to have her as our in house CFP, so that's awesome. All right Leisa. So let's get into the topic of today. So as we're sitting here recording, we're a heavy into this COVID panic. Most people are sheltered in place right now. A lot of people are worried about their income.
Naseema McElroy (00:57): A lot of people have experienced job losses and if they haven't yet experienced job losses, they're kind of panicking in that direction. Because most people, as we all know, our check to check, they don't have, you know, adequate savings to even cover a $400 emergency. People have a lot of debt as is the norm in America. So I wanted to address the um, the people that are living check to check right now. Um, what should they prioritize as far as um, saving debt repayment. Um, what are some things that they can do to kind of stabilize themselves in this unstable situation that we're experiencing right now?
Leisa Peterson (01:43): Yeah, it's a great question. And what I'd love to do is go through just a few checks [inaudible] everybody. Then we can kinda talk about like what else comes, is that okay? That's perfect. Like just what are the things like the top priorities that you want to be thinking about? Because even when I, even when you asked this question, I sort of regrouped and I was like, Oh my gosh, this is really important information that we don't always think about. And so before we kind of dive into specifics, I think if we could all just take a moment to make sure that we are taking time to realize things could be changing out there. We want to be more cognizant of what's going on. We don't want to run a negative. So the best way to do that is number one, to spend some time tracking expenses and income.
Leisa Peterson (02:35): Like it's so basic but we don't do it and all of a sudden we wake up and think, okay, where's all the money going? But number one, figuring out and once we figure out like what are the, we know how much money we've got coming in on a monthly basis, we are able to see what our expenses are or we're looking at our fixed expenses. Those are like rent and and car payments. The things that we know are going to be exactly a certain amount every month. Then we have our variable expenses. Those are the things that change, like how much money we spend on food if we go out and buy extra toilet paper, like all those things, you know? And, and in all fairness right now we may find, and I know this is happening in my house where we spent more money this month but we're not going to spend as much next month, but we're looking at the average, right of like what do you spend over a 12 month period on average and if that's changed recently, then go by the more recent numbers and be able to also notice if you have any financial goals that you're putting money towards every month.
Leisa Peterson (03:39): So maybe you're putting some money towards your 401k or things that you don't even touch, right? Cause they go automatically into your savings account once you've figured out your income and expenses. The other thing that I think is really cool is give percentages to them. So like 50% of my money goes to fix expenses. You know what you can do when you do that is compare it to what I'm about to share, which is how about if you said all of those expenses that take care of the needs are 50% [inaudible] and maybe 20% is like fun and enjoyment for example. And then you know, what do you got beyond that? Give it some assigned values and pay attention to it first to see where you're at. The second step is to understand if there are any places that you can reduce it. Expenses. The reason we look at what our spending is, we often notice that there are some things that we're like, nobody's using it.
Leisa Peterson (04:35): We don't need to spend this money. You know, we might find out that we are out of contract on our cell phones and we could actually lower our costs and take our phones and get them an a locked and go to a cheaper provider. Like these are the times that we look at those sorts of things because phones are expensive for most of our families, especially when we have kids and they all have phones. It's like ridiculous. So number one, track expenses and income. Number two, reduce expenses wherever possible. Number three, set goals. The biggest reason people I think end up living paycheck to paycheck is they haven't set a financial goal for themselves. So because of that, they don't get anywhere. Like if you get in your car one day and you just drove around in circles and then came home, you didn't actually get anywhere because you didn't know where you were going.
Leisa Peterson (05:27): Like it seems completely silly when you think about it another, but then actually how a lot of people live their lives. There aren't any financial goals and then therefore you don't ever achieve the things that you actually could have, could have achieved and bring you great comfort and a security. So maybe it's saving $1,000 for an emergency account and maybe after that you get to a thousand you're like, let's go ahead and go for 3000 you know your goals could be just a super simple, the other piece, once you've done all three of those steps, the next is to focus on what are you going to do going forward as far as budgeting and managing your money. Keeping it really simple. One way I love is value based budgeting, right? So value based budgeting says, okay, I've got that 50% of my money that's going to all the things that I know have to be paid.
Leisa Peterson (06:22): But if I'm going to devote any money for fun and enjoyment, I'm going to run it up against a values check to make sure that that thing that I spend money on is Apple. Absolutely, positively bringing me joy. And if, if the answer is no, then like put it aside and focus on finding the things that do bring you joy and all of a sudden you may find that there are some things that you've been spending money on that are not bringing you all that much joy. And this is when I think of like friends, sometimes we spend money to hang out with friends when it's, it's like not bringing us joy and we could just tell them, Hey, I love spending time with you but I don't need to spend $100 every time I hang out with you. How about we go for a walk with our, you know, space and all of that good stuff that we've got right now. So, okay, find your joy. And then finally it's about monitoring and checking and seeing if this is actually helping you. Are you actually able to save some money? And not be living paycheck to paycheck because now you've created some space and some way to save and to create an emergency account. So, you know, what do you think about that and what would you add?
Naseema McElroy (07:32): I love it. And I often say that most people just don't know what's coming in and going out. And that's what the huge issue is. I also like, um, where you talked about cutting expenses because, and I think, um, particularly during these times, it's super important to really be super diligent about cutting out the unnecessary because anybody can lose their job, you know, right now. And if you cut down, you know, say your expenses were $5,000 and you or you cut them down to three, two that are $2,000 is a whole heck of a lot easier to um, find something, a temporary job that covers $2,000 in expenses versus $5,000 in expenses. So kinda like be thinking like that. Even though the most important thing you can do during like an economic downturn or like a crisis period like we have is kinda like stay employed.
Naseema McElroy (08:25): But always plan like if you were losing your job. So I really liked that also like how you talked about having a goal. Because if we aim at nothing, we hit it every time. And yes, your analogy was like so on point because we run our lives, our money, our finances, like you know, we let our money control us, right? Like it just, we don't tell it what to do and therefore it just does whatever. And then we have anxiety about it when all we have to do flip the roles. And so I think that's super important. And by setting goals you are flipping the role. Um, I love the value based budgeting. It reminds me of the Marie Kondo spark joy and that's awesome because I think that's where people fall off in their budgeting because budgeting is super important no matter which way you budget.
Naseema McElroy (09:14): Um, it's super important that everybody has some form of a budget. Um, and it's super hard for people to stick to because they look at it as deprivation as opposed to what it really is, is an opportunity for you to spend things on the things that are important to you and to acknowledge that and not waste money on things that really don't bring value. Right. And so I really, really love that. And then lastly, I really liked that point that you're talking about, um, in spending money on, um, ways that really aren't serving you and like hanging out with friends aren't to impress other people or look at this time as an opportunity. And with this like the shelter in place is social distancing are really hope. People really see like the value of like true friendship and understand that during these times it's not about hanging out and spending money. It's really about the true connections that you have as a friend and taking advantage of different ways to connect that don't necessarily cost money. And so yeah. Excellent. Excellent points and I agree with all of them. Yay.
Naseema McElroy (10:19): Other thing I just was thinking is if you could save a little bit of money and actually buy some stock while it's on sale. Right? Like go for it. Cause this is the time, like we just got a 25% you know, if not more sale on stocks is count. Yes. So go use that money you're saving because if you buy it that way and it goes, you know, backup, even if it takes a few years, it's like you're going to be so happy that you bought now or you buy during this time. So create some money that you can invest. I always like to think of spending the best kind of spending we can ever do is the spending that is on investments. Yes. Yes. Like change the way you think about it instead of the person, the shoes that lose value, buy things that gain value and you'll never regret those decisions.
Naseema McElroy (11:17): Yes, I love that. And so I'm not an advocate of like buying Siegel stocks, but like I was listening to this podcast today and it was like so on point. Like, if you're a Disney person, you can't go to Disneyland right now, but Kassala Disney stock is epically low and you know, it's going to go back up. This is the opportunity. I'm not advocating any kind of way, I can't give financial advice, but just like look at the things that are coming up right now as different kind of opportunities. And I feel like you'll flourish, uh, through these situations. I love it. Yeah. Oh yeah. And then the other thing I was going to say is that the best kind of savings you have, our investments, but the biggest investment that I think people should make is investing in themselves. And while people have a little bit more idle time, maybe cause they're not community, um, they're homeschooling kids.
Naseema McElroy (12:05): Okay, whatever. Maybe that takes up all that time. I really feel like people should invest if it's not even monetary, but time in learning a new skill, learning some new things about self improvement. I feel like a lot of people are putting really, really good free content out there for people to learn and grow. So take advantage of those opportunities because you can always look at a situation where others are looking at, Oh, you know, this is a hard time as an as an opportunity for growth. And so I see a lot of it. And so just to kind of shift your people's perspective out there, you know, these are things that we could be doing.
Leisa Peterson (12:41): Yeah. And they're free in many cases right now. I think I saw Yale was offering like their favorite class for free. Oh fine. Those opportunities.
Naseema McElroy (12:52): Yes, yes, yes. So much opportunity. And so just to summarize, I think we covered so much, but um, instead of looking at this situation as a place of like scarcity and fear, there's a lot of things that we can be doing to prepare ourselves and to kind of shift our focus so that we can get the most out of this situation. Also, another thing that I wanted to mention is if you're worried about bills in debt, every company, any company that I owe money or have any kind of money, monetary relationship with from utilities to credit cards, have a cobot hotline that you can call. And if there's a challenge that you're facing, Oh, you have to do, sometimes it's just pick up the phone and come up with the solution and maybe it's just pausing any kind of extra payments until you have some liquid savings. But don't be in fear. Look at the things that are available to you. Reach out to people if you need help, act fast. Don't wait until the last minute until you really, really need, need, need that help. And I think, I think we'll be fine.
Leisa Peterson (13:59): Yes, we will totally be fine. And we could come out even stronger, more capable through this.
Naseema McElroy (14:10): Me.
Leisa Peterson (14:17): Ooh. She's like budgeting already. That's awesome.
Naseema McElroy (14:23): That's hilarious. Yes. We used to be Disney season pass holders, but now we're not anymore. And so, um, her birthday is on Thursday and we were supposed to go to Disneyland. Um, but I, but I refuse to pay $400 per one day for the both of us. And so that's where it's a lot of dollars, but now Yuma Disneyland is closed so we wouldn't be able to go anyway. Yes.
Naseema McElroy (14:48): okay. So yes, we have a third person joining us on this podcast today, but that's okay. I love her cause that's real life, that's real life. But anyway, he's helped people. Leisa, how people can get in contact with you, where you can be reached. Wealth clinic.com. That's my website and you can learn more about things that I'm working on and my upcoming book, they're awesome. And Leisa will be joining us for the conversations with the CFP going forward. And if you have any questions for us to cover during this segment, um, please send them to me at nurses' on fire podcast.com/ask. All right, so thanks again Leisa, and we'll see you guys next time. Thanks. Bye.
Hey there I’m Naseema
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