I’m self-employed, so my income depends on me always finding my next paycheck. I train nonprofit boards of directors on how to ask for money, and the first thing that organizations cut are training budgets. To me, this is “penny wise, pound foolish” because a recession is precisely when organizations need to do a better job of asking for money. However, because it impacts my income, I need back-up plans. Here’s what I’m doing.
Do you actually know where your money comes from and where it goes each month? I had a rough mental idea of where my money went, but I sat down last seven months ago and actually tracked a month of expenses by carrying a notebook with me and writing everything down. It was eye-opening, and led to my making immediate changes.
I was spending $135 a month on premium cable and Internet. I needed the Internet, but I wasn’t watching the cable. By cutting back to basic cable and getting a new Internet company, I saved $75 a month.
Next, I realized I had high rates of interest on my credit cards. After I missed just one payment on one card a couple of years ago, another card raised my rate to 29.99%. I called each of my credit cards. Chase Visa lowered the rate from 29.99% to 20.99%, gave me a 3.99% rate on balance transfers, and told me to call back in six months to get the purchase rate lowered again. Citi MasterCard lowered my rate to 1.99% for six months and 8.99% after that. Bank of America gave me a short-term balance transfer rate of 0% but a purchase rate of 17.99%. The only company that wouldn’t negotiate the rate was Macy’s, and at 24% I paid it off immediately. I moved my money around (which cost 3% in fees), paid off about one-third of the charges in six months, and developed a plan to pay off the rest. About half of my debt is at 3.99% and the other half has been at 1.99%.
Because I realized my debt was too high, I went to Debtors Anonymous. These meetings helped me feel less alone, and I learned a lot about how to cut expenses and cope with change. If there aren’t meetings near you, you may be able to phone into a meeting. I also read “Pay It Down” by Jean Chatzky and that was very helpful.
However, cutting expenses isn’t enough; I also have to generate new income. I took a marketing class (*I* don’t believe in cutting my training budget, even if other people do), with small-business guru Mark LeBlanc. He suggested one thing I started immediately.
Mark LeBlanc said to set our goals not by the year but by the month, and to figure out how much money we would like to make and by doing what. His formula is to write the following and fill in the blanks, “What will I do today to (sell, create, produce) X a month at $Y each?” In my case, that meant writing “What will I do today to book two trainings a month at $2,500 each?” He suggested writing that question down in my schedule book each a.m. and answering it each p.m.
So, each morning I ask, “What will I do today to book two trainings a month at $2,500 each?” Each evening I write the answer to that question. Someone else might write, “What will I do today to sell $5,000 worth of widgets this month at $10 a widget?”
By creating 30-day rolling goals, it’s easier to break down what must get done today. By continuing my education during this recession, I am exposed to new ideas to create income. By knowing what I need to do today to create income and reduce expenses, my stress is lower. Dealing with hard times means both reducing costs and increasing income, and the more control I can exert over finding new income, the safer my finances will be during difficult times.