As I grow older, I worry more and more about my family. I am constantly thinking, “What if something goes wrong, how would our family deal with it?” These thoughts are bolstered by waking up every morning with news anchors talking about the fiscal cliff, debt ceilings, and government shutdowns. While I still worry, we are very well prepared. Here are some of the things my wife and I do to lower our risk as a family.
How To Reduce The Worry of the Fiscal Cliff
- Keep Your Paycheck the Same – When I started my current job five years ago, I decided to pay myself first. I was able to do this by keeping my paycheck the same. In other words, if my net pay was $1,000, no matter what happened I adjusted my withholdings and contributions to keep my paycheck at a steady $1,000. Every raise that I received since starting my current job then has been reallocated in one of the ways below. Yes, prices are going to go up and it can put a squeeze on your budget, but that can be offset by paying off bills and getting rid of some monthly payments.
Get a Second Job – In additional to my day job, I have a second job. I’m not talking about a “Welcome to Wal-Mart” or “Do you want fries with that” kind of job. I’m talking about turning your passion or hobby into a money making venture. I love to teach so I became an adjunct instructor at a local college. What is your passion and how can you make money from it?
Max Out Your 401k – I am very proud to say that I put 17% of my income into my 401k. I did this using my strategy above where I put my raises toward my retirement savings. Not only has this significantly bolstered my retirement savings, it has given me a safety net. Earlier in 2013, when their was the increase in the payroll tax, I was able to offset that by reducing my 401k contribution slightly. I also know that if my wife ever loses her job, we could easily stop my 401k contributions for the short term and greatly reduce the impact of losing her income.
Keep Your Bills Low – Over the years, you have taken on higher and higher bills because you could afford them. For me it was getting the faster internet speed, a few extra channels on the cable package, and buying that new TV. It is fine to have these things when the times are good. However, anticipate the need to scale back one day. The best way to do this is to think ahead when you make your purchases. For example, I know I could cancel my Satellite television package that costs about $120 per month and switch to Hulu Plus!. I can do this because over the last few years I made sure to buy TVs that could play Hulu when I had to replace an older TV. I also take every opportunity to pay a little extra up front to cut my bills over the long run. I did this when buying a new water heater that costs about $15 less a month to run than my old heater.
- Increase your 401k contributions.
- Increase your tax withholdings and receive a larger refund at the end of the year.
- Open a 2nd savings account.
Let’s face it, you cannot stop things from happening like the political budget battle, but you can make sure you are prepared for them. How are you preparing for the next financial disaster?
p.s. You can get more tips like this delivered directly to your inbox by signing up for my email list.