why I'm not panicking (a lesson)

[silvana]

The economy is tanking. Everybody is panicking. I work for a tiny theatre company who is as close to joining the ranks of companies closing their doors as any other theatre company in the country. (we're okay right now, but we're not exactly sitting on a pile of cash to get us through - and I don't know that I'm going to be able to write my own paycheck on December 1st, or any time for the 3 months after that.

And yet - I'm not panicking. Wanna know why? Because this is where my particular financial skillsets really come into play. If I am good at anything at all, I am good at surviving on hardly-any-money. People have asked me how I do it, and I've never had a good answer, because to me it seems as natural as breathing. But after weeks of reading articles and hearing radio stories about people struggling, I've come up with some ideas that apparently aren't obvious to other people:

First, the boring basics:

• For crying out loud - if you haven't already start using software to track your expenses, start doing that RIGHT NOW. Quicken and Money are both fairly effective for personal finances, although if you're self-employed or have anything else really complicated going on, Quick has more expansion capabilities. They're not that expensive and they are worth it. There is absolutely no reason not to do this, unless you're the sort of person who takes joy out of making Excel do really complicated stuff.
• Make a budget. This is easy if you have a couple years of Quicken/Money (Q/M) data to start with. If not - start with the amount of money you expect to make, over-estimate your taxes and under-estimate any other income, to make that number the worst case scenario. Then - look at your necessary expenses and round everything up. Use your largest phone bill for the last year, your heating bill from December and your electricity bill from May. Don't forget to account for the fact that your landlord is going to raise your rent, or that the CTA is going to raise fares, or that you occasionally go over your minutes on your cell phone plan - and remember to include your prescription medications. Food is more expensive than you think.
• There are lots of books about budgeting, and lots of theories. Remember that the only important rules are the ones that will work for you. Also remember that you're not a public company, and therefore nobody is going to audit your cash flow at the end of the year to see how well it lined up with your budget. So it's okay if you make more than you expected, or spend less. (the opposite is not okay).
• Set up automatic payments for anything predictable enough for that, including student loans, car payments, mortgages, netflix memberships, AND automatic transfers to savings. That last one is especially important, so that some day you too can quit your boring day job to pursue your dreams.
• Don't forget to put all of those automatic payments in Q/M as recurring payments - then you never have to think about them again.
• The only things worth going into debt for are education and housing. And, as we're learning - don't go into TOO much debt for either.
• Worth a separate bullet point - please note that vehicles aren't included on the list of things worth going into debt for. Save up, and pay cash. As my daddy likes to say, "You can always change your mind about what you want to do for a living, as long as you don't buy a brand new fancy car that you have to keep paying for."

Now for some quick-and-dirty details for saving money while still enjoying your life. These rules are written to be broken, of course, but surviving a personal financial crisis requires making them habits, first.

• Eating in restaurants is for socializing. When you're eating alone, eat food you made yourself.
• Don't ever pay full price for clothing. Ever. Even at Filene's Basement, go straight to the clearance rack.
• Don't even go in to the bookstore. Sorry. The library is your friend, as are your friend's bookshelves.
• Get into the habit of leaving your credit cards far away from wherever you use your computer. Don't let any of your favorite shopping sites memorize your card number for you.
• Cancel your cable (but keep the internet).
• Stop reading blogs or articles about the latest cool gadgets.
• Never spend more than $2/lb on fruit.
• Find a woman who raised a family with at least 3 children between 1940 and 1980 and ask her for recipes that might freeze well.
• Give up caffeine. (no, seriously - do some quick math on how much you spend on coffee a week)
• Stop smoking (again, this isn't a health screed - just a practical financial comment).
• Don't listen to commercial radio or watch network television live. We all like to think that advertising doesn't effect us, but I've noticed that it's been much easier for me to stay within my budget since I started watching all television online or on DVD).
• Any time you unexpectedly come into some cash (you find a $5 on the street, or you win the baby-pool at a coworkers baby shower), put that cash into an envelope in a secret place at home. Do NOT keep track of your secret stash in Q/M. Once or twice a year, go shopping with that envelope for entirely guilt-free indulgence.
• Expand your definition of walking distance

And finally, some things that are worth spending money on:

• Good walking shoes.
• An apartment you don't mind spending time in, and therefore won't be constantly compelled to go spend money somewhere else.
• Food and alcohol at grocery stores that you can share with friends.
• A subscription to your favorite magazine.
• A monthly donation to your favorite charity. Set this up as automatic along with the rest of your bills. Trust me. The emotional effects are more-than-worth-it in fighting back the panic.