Personal Financial Strategies in Times of Turmoil

For many of us, these are the most economically uncertain of times.  Sure there are never any guarantees, but the last few years seem to have had a sharper edge.  If not already financially strapped, we are less confident about the future.  How then to save or plan? 

• Do a household budget.  Track your spending for a day, a week, a month.  We think we know but do we really know how much goes to coffee and the lottery?  You don’t necessarily have to change anything, but getting a firm, detailed understanding of your current situation is necessary.
• Balance your checkbook – yes you can, you don’t need me to do it.  Not only will you grasp more of your situation, you may well find some erroneous or hidden charges.  If you bounce checks – don’t!
• If you just can’t balance your checkbook regularly – go on-line to check your account activity daily.
• Do you use a software program like Quicken for home finances? Consider downloading the bank statements but don’t just leave them there or assume they are correct! You may have written checks that haven’t cleared or forgotten to make a deposit. Moreover, you can use the program to help analyze your expenditures and cash flow. 
• Still bouncing checks? Set up a small savings account that is linked to your checking account and add to it periodically. Don’t touch it, forget about it and work from your checking account.  You will have a cushion that, if set up properly, will give you some protection from the occasional mistake.
• Did you borrow money from a friend or are you overdue with a service provider?  Don’t hide under the covers.  Make a bare minimum payment plan – even $10 a month. As a friend and as a professional I vastly prefer the honesty and effort of that rather than having to chase people down or have the relationship dissolve because of the awkwardness.
• Look into helpful online sites like mint.com that can help you organize and understand your finances, and Wisebread that offer tips for frugal living.
• If at all possible – and if you are just scraping by it may not be – “force savings”.  For instance, set up an automatic monthly transfer to an IRA (“Individual Retirement Account”). Or automate monthly transfers to a savings account (see above). The amounts don’t matter as much as the sustained activity over a period of time. This is also called “paying yourself first”.
• Does your employer have a pre-tax plan for health insurance or child care?  These are no-brainers; they save both you and the company money. You could save 30% or more.Really.
• Does your company match your retirement plan contributions to a certain level? Find out. and then make every attempt to earn the maximum match.  Money on the table.
• Do you get a big tax refund every year?  It’s nice if you’re flush but not if you can barely make ends meet.  Change your withholdings or ask your accountant or h.r. department to project various scenarios. You can claim more withholdings than you have dependents – lots more.  If you qualify for the earned income credit look into the “advanced e.i.c.” 
• On the other hand if you are collecting unemployment be careful if you forego tax withholding.  Pay later if you must but do your best to be prepared.

And while it is not a financial tip per se – while the economy teeters we each have our own communities to nurture and support.  They are there for us as well.  Look into the time-banking movement, which is about offering and receiving services in a non-monetary way.  Join a co-op.  Volunteer.  People like to do business with those that share their values.  Promote your friends’ skills and ask them to do the same for you (In my business I call this “networking for clients.” – but I do it for friends as well, actively).  Always have your business cards with you and if you haven’t made any – why not?   Communities include on-line communities as well.  Personally I have found that – properly used – they can help you meet like-minded people for personal or business interactions.  Why do I say that here?  Many, probably most, of us are experiencing an unprecedented degree of economic uncertainty right now.  We have that in common and by helping each other we help ourselves as well.

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Rich Streitfeld is a CPA with Aaronson Lavoie Streitfeld Diaz and Co. in Cranston. He loves working with businesses, families and non-profits and can be reached at rich@alscpa.com or (401) 223-0205. He authors a blog, “Peace Love and Business Planning – Prosperity for the Rest of Us.” – w.ww.peaceloveandbusinessplanning.com.