Creating a Backup Financial Plan

If you, or your spouse, lose your job, or an opportunity you were sure was going to payoff goes bust, would you be in financial trouble?

Or do you have an alternative financial plan- a Plan B?

Your Plan B

No-backup-plan While it’s not fun to think about what could go wrong, we all do it anyways, it’s called worrying. But, instead of just feeding your anxiety, crafting a plan will help you feel more in control when life takes an unpleasant turn.

First, consider, what can you cut?

Cutting back on life’s luxuries is the fastest way to react to decreased income. We’ve all got habits we indulge in when plenty of money is coming in that we can do fine without when funds run low.

Pull out the budget (you do have a budget, right?)

Use an adaptation of your Simple 3 Step System for Making Financial Decisions to give each non-essential item a ranking. Also make a list of less expensive options i.e. borrow books and DVDs from the library instead of purchasing them. Subscribe to Netflicks or Hulu instead of cable TV (requires keeping the high-speed internet).

Now, when you need to respond to a decreased income you’ll already have a plan to live more frugally.

Next check the emergency fund.

Compare the balance to your monthly expenses. It’s OK to use the reduced amount you came up with in step 1. If it doesn’t equal 6 – 8 months of expenses, make increasing it a top priority. Maybe take a couple of the options from step 1 now and redirect the savings into the fund.

You’ll sleep better (and need fewer anxiety treatments) when you have a real financial cushion accessible.

Make plans to find alternative income.

What kind of skills do you have or could develop to earn some extra money? Everybody knows how to do something other people will pay for. Dogwalking, housekeeping, data entry, even taking surveys online. Be sure you don’t respond to scams – never “pay-to-play”; you’re the one who should be getting paid for your services.

Start looking at ways to offer your services and build a little cushion. It’s a lot easier to ramp up a small ongoing business than to start one from scratch when you’re desperate for funds.

Life happens; we may not know when we’ll have to deal with a loss of a job or a life partner or our health. But we can have contingency plans and mitigate the stress and damage by acting on a pre-established plan instead of ignoring the financial ramifications.

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1 thought on “Creating a Backup Financial Plan”

  1. Even with unemployment fading, this is good advice.
    Sometimes I think I’m hanging onto some “extras” just so I’ll have some room to cut should I need to?
    But mostly I’m working on the develop new sources of income – my first online course launches in a couple months!

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