Right about now, Americans across the country are checking their bank account balances and mailboxes, eagerly awaiting their stimulus relief money to arrive. If you are like most people, you have already spent this new money in your mind. Some options may be quite responsible, while others may be regrettable. We have put together a fairly comprehensive list of Don’ts that may give you pause. A list of Do’s will be posted next week. So, not to burst your bubble:
What Not to do With Your New Money
- Quit your job
- Buy a big screen TV
- Don’t give or lend it to your friends (You probably won’t get it back.)(Think airplane: secure your own oxygen mask first.)
- Don’t pay off credit cards. (Just yet)
- Don’t pay advanced rent, especially to landlords who owe a mortgage
- Don’t buy gift cards for that rainy day
- Don’t treat all your friends for dinner and/or drinks
- Stay away from binge online shopping
- Don’t act on your luxury item wish list
- Don’t try to buy the love of anyone, friends, kids, grand-kids
- Don’t play the lottery, don’t gamble it
- Don’t blow it on entertainment
- Don’t stock up on items from the liquor store or feed addictions
- Don’t eat take-out all the time
- Don’t buy the latest and greatest cell phone
- Don’t buy flowers and landscaping
- Don’t hop on an airplane to visit friends or family
- Don’t begin a new, expensive hobby
- Don’t hoard toilet paper ?
- Don’t keep it in your checking account just to dwindle away
These recommendations are given as general advice. You may have special circumstances which would affect your spending decision. For example: You may need to purchase a new phone if your old phone was damaged and unusable. Communication with family and friends is important. Also, some jobs require the use of your phone and accessibility.
Before you do anything with the money, decide to NOT do anything with it! That’s right. This is the time to take your time making decisions. After all, how often does free money arrive? Don’t squander it… USE this unexpected resource wisely. We want to equip you for financial success!
Getting Started: Household Spending Plan (HSP)
The very first step we recommend is to make a household spending plan, otherwise known as a budget, and take a hard, honest look at your financial position. Now, don’t groan. Think about it. You can’t make the best decision without all the facts. If you have not already written down all your immediate “necessary” monthly expenses (maybe because you were afraid the numbers may not stretch far enough), now you have a little financial backup to lessen the “potential” painful discovery. We have found that people are surprised that they have enough money each month, they just don’t know where it went!
If you have access to a computer spreadsheet such as excel, the process of adjusting numbers that add and subtract will take much of the effort out of it. For your convenience and use, we have uploaded our excel spreadsheet templates so you can get started right away! https://www.encompassministriesinc.org/finance-training/
If you don’t have a way to access to a computer or similar software, simply get out a pad of paper, a pencil with an eraser, and a calculator.
Gather all your bills… yes, open those envelopes! This is where every expense should be categorized as a need, want, or luxury. Needs are your rent or mortgage payments, utilities, vehicle/ transportation expenses, and food. Wants and luxuries may have to go for now.
Early in the coronavirus shutdown, news reported that the government would urge landlords and mortgage companies to give grace for up to two months on rent/mortgage payments, penalties, and evictions. The utility companies followed suit, temporarily extending shut offs.
But! No one said these financial commitments would go away! You still need to pay your rent or mortgage. If you have lost your job and there is not additional income to cover your rent or mortgage, it is advisable to use this stimulus money to secure the roof overhead. There may be some non-profit organizations or churches that can help with rent and/or utilities, but don’t rely on their financial ability to stretch as far as the communities’ need. You should do everything possible to prevent becoming homeless.
Regarding food… if you are struggling with basic expenses like rent and utilities, do not spend money on non-perishable food items that you can get for free. There are several free food giveaway efforts going on right now.
Our ministry, Encompass Ministries/Papa’s Pantry is giving food away on Mondays, Wednesdays, and Fridays from 10:00-1:00. You do not need an appointment, but please do bring a picture ID. If you have special “at-risk” concerns, please do call us the day before you plan to arrive so we can get a little information and minimize your exposure.
Household Spending Plan (HSP) Examples: (You can download these worksheets from https://www.encompassministriesinc.org/finance-training/
Income vs. Expense Worksheet (example)
|Income source||Income||Outgoing||Expense Description|
|1,400.00||Rent / Mortgage|
|Name of employer 1||1253.12||150.00||Electricity|
|Name of employer 2||798.04||100.00||Gas Utility|
|Name of employer 1||1253.12||75.00||Water|
|Name of employer 2||623.23||200.00||Phones|
After gathering your income amounts and bills, simply add them up. How much money is actually coming in each month? How much is supposed to be going out? If your income has been affected by the COVID virus, you may not know specifics just yet. The Department of Labor is working hard to process all the new Unemployment claims, but this will not be a quick solution. It may be several weeks before actually receiving money if your claim is approved.
Monthly Cash Flow Worksheet (example)
Using a calendar, continue to populate every week of the month with expected income and expense due dates.
The columns are formatted exactly like a check register. Date of the transaction on the left, next is the explanation, next is the expense, next to the last is the income, and the last column is the total after subtracting the expense or adding the income. Those with access to computer spreadsheets can easily program the last column to add or subtract based on the information plugged in. It is also easy to experiment with “if/thens,” adjusting dollar amounts to check out potential results. It is also easy to manage in real time as bills are paid.
We at Encompass Ministries have been helping families with this process for over 15 years. You can plan what and when you pay based on cash flow. Never be surprised again with expensive overdraft fees. We are still here to help!
Once your monthly plan is complete, you can then begin to make the best financial decisions based on fact and not estimates and guesses you try to mentally calculate.
You can still call or email us today with any questions you may have. We are happy to help you get started and give advice. *All financial decisions are yours. We are available to give guidance.
After Your Base HSP is Established
Is there anything left at the end of the month? If not, it is time to generate an income. Despite all the layoffs and business shutdowns, there are companies that are hiring, some with career opportunities and benefits! Unemployment may be your answer, but even with that, you can still get a part time job without jeopardizing the unemployment benefits. Seek the Department of Labor for exact dollar amounts and criteria.
If there are dollars left at the end of the month of calculated needs, you may be in pretty good shape for now. You might consider putting your stimulus dollars in an emergency savings account. We don’t know what the future holds for the virus or economy. You may need to have available reserves for the upcoming weeks and months.
What Constitutes an Adequate Emergency Fund?
The very basic amount to have on reserve is one month’s worth of expenses. Back in 2008 and 2009, it was thought that 6 months of expenses were enough. Sadly, as the deep recession lingered, 9 months’ to 1 years’ worth of expenses became the new target. Today, we have a different president with very different strategies. However, containing the virus is still the greatest unknown in our society today, which determines the reopening of the country timetable.
If your job(s)/income have not been affected and you have adequate emergency funds in place, then please do USE your disposable income to help stimulate the local businesses that are trying to stay afloat.
Next week, after you have had a chance to get a clearer understanding of your financial position, we will post Part 2 of “How to Best Use Your Stimulus Money,” so keep watch! The blog can be found on our website towards the bottom of our home page, encompassministriesinc.org.
Going forward, we are all in this together. Please let us know if there is anything we can help you with. Encompass Ministries helps with food assistance, job and career training, financial literacy training, and life skills. Financial assistance is not available.
God Bless you in the upcoming weeks and months. Stay safe and well, and financially aware. If you have any questions specifically about your situation, please feel free to call us.