The reality is that we all need money to live.
We have rent to pay, loans to pay back, and food to buy.
So when our source of income is threatened by some unforeseen circumstance, it’s easy to feel a rush of nerves.
It’s a scary situation.
But there are steps we can take to help us calm our nerves when faced with financial uncertainty.
And by taking these steps we can start to feel confident in our finances and relieve some of our anxiety.
This is exactly what I did recently when feeling overwhelmed with all of the recent what-ifs of life.
I sat down, opened my budget, ran some numbers, and laid out some contingency plans.
Doing this simple exercise helped put my mind at ease.
It gave me a sense of relief while also giving me the information I would need to make future financial decisions.
Knowledge is power.
If you are feeling nervous about your potential financial future, here are a few steps you can take to ease your nerves.
Create a Bare-bones Budget
A bare-bones budget consists of only the expenses you absolutely need. All of the “fluff” you are accustomed to will be cut out.
After you remove the fluff, you will end up with the amount of money that is needed for you to pay your bills and buy life’s necessities.
Your bare-bones budget would include things such as:
- Rent/Mortgage
- Groceries including Pet Food
- Household Goods
- Loan Repayments
- Utilities
- Insurance Premiums
- Car Maintenance/ Fuel/ Transportation Costs
The goal of this step is not for you to start living on this bare-bones budget. It’s purely an exercise that allows you to determine what your spending would look like if you eliminated all of your “wants”.
It’s an eye-opening exercise that can shed light on how much of your spending is wants vs. needs.
And if you only do one thing to help calm your nerves in times of financial uncertainty, this is the one I would suggest.
Simply going through this exercise will provide you with key information you can use to help guide future money decisions.
And it will help put your mind at ease since, more often then not, it reveals that you can live on less than you currently spend.
To learn more about creating your very own bare-bones budget check out: Bare-bones Budget: Why You Need to Create Yours Today
Determine How Many Months Your savings can buy
Look back at your bare-bones budget and determine how many months your savings will buy you if you no longer had a source of new income.
Knowing how many months you could cover with no addition income will help you understand the strength of your safety net.
When you do this exercise, one of two things will happen.
It could put your mind at ease knowing you will be OK for X number of months if disaster struck. Or it can add to the nerves if it’s lower than you feel comfortable with.
However, understanding that this knowledge can induce anxiety is no reason to avoid it.
This is the type of situation where information is power. Because with this information you can take action.
If you don’t feel comfortable with the safety net your savings provides, take that fear and let it motivate you to improve your situation right now instead of waiting until disaster strikes.
You can start cutting back on expenses you identified in your bare-bones budget exercise that are more “wants” than “needs”. Or you could even divert some of your investments, such as retirement savings, to your emergency fund until your safety net is where you want it to be.
By simply understanding the strength of your safety net, then taking the necessary actions, you start to ease those nerves and increase your confidence in your ability to withstand a storm.
Research the Options Available to You In Case of Income Loss
Get to know the benefits available to you if the worst-case scenario becomes reality and you lose your source of income.
Questions to research include:
Are you eligible for unemployment? If so what would the payout be and are there any stipulations? Will this cover your bare-bones budget? Or will you have to dip into savings?
What would your options be for health care? And how much would it cost?
By asking these questions now, when you are not nearly as stressed as you would be if you lost your income, you’ll be more mentally prepared to take on these challenges if they turn into reality.
Brainstorm Other Potential Sources of Money
Make a list of all of the other ways you could get your hands on money if you found yourself without the income you are used to.
This could be a list of alternative jobs, assets you could sell, etc.
These ways may be your last resort when in a dire situation, but it’s helpful to know ahead of time what options are available to you.
That way you can avoid frantically looking for alternatives or making rash decisions when a financial hardship occurs.
You Got This
Taking the time to fully understand your financial situation and options will do wonders for your nerves when faced with financial uncertainty.
It may not be fun to remove the blindfold, but it will put your mind at ease knowing where you stand and how you will survive a financial hardship.
And don’t worry if you don’t have a warm fuzzy feeling after looking at your finances.
Instead, take this opportunity to see what you can do right now.
By addressing some shortcomings now, you will start to feel more at ease with your ability to tackle financial hardship.
Knowledge is power.
And it’s in this time of uncertainty that knowledge can bring peace of mind.
