Today’s Solutions: September 28, 2023

In a world where expenses seem to outpace income and the looming threat of rising interest rates, it’s time to roll up your sleeves and take command of your financial ship. You can withstand the storm and keep your financial vessel afloat by making a few wise modifications.

Tighten the belt, lighten the load

To begin, let’s examine your spending. Keeping track of your costs with an app, a spreadsheet, or a good old-fashioned notepad can shed light on where your money is actually going. Begin by separating your set expenses (such as rent, utilities, and childcare) from your discretionary expenses (anything else). 

As Robyn Thompson, a certified financial planner at Castlemark Wealth Management, correctly says, focusing on discretionary expenditure is an efficient method to reduce your budget’s surplus. After all, it’s easier to cut back on retail therapy than it is to cut back on something like rent or fuel for your car.

Re-evaluate your expenses

Natasha Knox, a licensed financial advisor at Alaphia Financial Wellness, observes eloquently that what we value differs from person to person. Examining your priorities can show places where you can cut or eliminate expenses. 

While food is a necessity, the way you eat can change. Examine your grocery shopping habits: Are you paying premium pricing at luxury retailers, or are you looking for more affordable options? Weekly meal kits and frequent dining out can quickly add up. Examining streaming services and reducing automated reloads on gift cards can also result in big savings. As Knox recommends, “Mindful spending is key, so consider every expense thoughtfully.”

Build an emergency fund

Building an emergency fund may appear paradoxical during difficult times. However, when unexpected financial storms strike, this cushion will be your lifesaver. Aim to save enough money to cover three to six months’ worth of living expenditures. Begin by treating your personal savings as your most essential monthly bill, as Robyn Thompson says. Set up automatic transfers from your paycheck to steadily develop your emergency savings.

Safekeeping and separation

Thompson recommends keeping your emergency money apart from your investing accounts in a high-interest savings account. Keeping the funds in cash not only makes them easily accessible but also reduces the temptation to use them for non-essential expenses. This fund serves as your financial fortress in a world of fluctuating finances, protecting you from future worries.

Defeating debt one step at a time

Conquering consumer debt is at the forefront of financial resilience. Pay off high-interest debt first, starting with credit cards. Robyn Thompson’s advice is once again applicable—consolidate your obligations into a lower-interest line of credit, reducing overall interest expenses and freeing up important cash flow. However, be cautious; consolidation should not be interpreted as an invitation to greater debt buildup.

Diversifying income streams for stability

Economic downturns can result in job insecurity. Diversify your income streams to protect yourself from probable layoffs. Accept side hustles, look for opportunities for extra shifts, contemplate overtime, or even look into renting out vacant space. These additional income streams might act as life jackets, ensuring financial stability during difficult times.

Seek professional advice on your portfolio

As markets fluctuate, it is critical to obtain professional financial guidance. Connect with a licensed financial professional if market volatility and inflation fears keep you awake at night. Confirm that your investing portfolio is consistent with your risk tolerance and goals. Robyn Thompson recommends a varied and well-balanced portfolio as a compass to guide your financial journey.

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