Master Your Money Bootcamp: Draft a backup plan
Welcome to the final week of the Master Your Money Bootcamp. This week we're conducting a thought experiment.
Exercise 4: Problem solve
Even the best-laid plans can crumble. So, in addition to creating and executing our ideal financial plan, we need to create a backup plan to guide us when circumstances change.
Being good with money doesn't mean things never go awry. It just means that when they do, you have the ability to recover quickly so that A) you can still pay your basic living expenses without digging yourself into a financial hole, and B) you can keep working toward your long-term goals.
The goal for this week: Draft a backup plan.
1. Calculate your bare minimum expenses, either on a weekly or monthly basis. This includes items like your rent or mortgage payment, food costs, healthcare costs, and maybe even childcare.
Think about how you would be able to cover these expenses if you lost your income or part of it - would you apply for unemployment or food assistance? Call your landlord or mortgage lender and ask for a temporary pause? Rely on your cash emergency fund or ask family members for help? Maybe you would tap a mixture of resources, but in what order? Having this figured out means you can spring into action thoughtfully and avoid impulse moves you might regret later, like pulling out your credit card or making an early retirement withdrawal.
2. Imagine you won't get back to your ideal income level right away, but you do have money leftover after covering essential living expenses. What will you do with it? Contribute to retirement savings or your kid's college fund? Keep your gym membership or go out to dinner a few times a week? It can be uncomfortable to think about these things, and many may seem like impossible decisions. But remember that this thought experiment has a purpose, and that is to ensure you control your money and not the other way around.
3. Consider consulting a financial planner if you want to delve deeper. Advisors have advanced tools that can play with different variables to show you how one decision could affect other parts of your financial life. They will walk you through "what ifs" you probably haven't considered, and together you can concretize a plan B that's ready to go should you need it.
TIP: Use tools like the XY Planning Network and SmartAsset's Smart Advisor Match to find a financial professional.
As a reminder, here's what you'll accomplish in this month's Bootcamp (we'll link to each exercise as it goes live):
Master Your Money Bootcamp: Stick to the plan
- Exercise 1: Check in on the groundwork you've laid so far
- Exercise 2: Re-evaluate your goals
- Exercise 3: Protect your wealth
- Exercise 4: Problem solve
- Virtual Live Event: How to Invest Smart & Build Wealth
For each exercise, you'll get a detailed explanation of how to complete it and why it's important. Use the hashtags #MasterYourMoney and #MasterYourMoneyBootcamp to share your thoughts, progress, and connect with others across our Twitter, Facebook, LinkedIn, and Instagram as you make your way through each exercise, then join us for the live events.