With inflation rampant and a recession on the way, it’s natural to wonder what exactly you can do to protect yourself if the worst happens. Should you skimp on your daily coffee habit? (Spoiler alert: not necessary). Filling up your emergency fund? Re-evaluating your entire personal finance strategy? The uncertainty about all this doesn’t help.
Courtesy of her first $100K
businesskinda.com sat down with financial expert Tori Dunlap, founder of Her first $100K and author of the forthcoming book Financial Feministto discuss what you can do now to protect your money, and how value-based spending means cutting back without Eliminating it completely can make you a lot happier.
“We know there’s going to be a recession at some point,” Dunlap says. “We just don’t know exactly when, and anyone who tells you the recession is coming at this time of day is like the madmen predicting the coming of God.”
It’s not if, but whenWhich means now is a great time to get serious about your financial game plan. That’s going to mean different things to different people – it all depends on your circumstances and goals. But for everyone, the most important thing is not to panic, because you do have options. Dunlap suggests making a few key moves.
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If you don’t already have an emergency fund, start saving one now, and if you do, consider building it up. If you have three months, six months, or even a year of living expenses tucked away, you can gain valuable flexibility along the way.
You also need to secure your income streams. In the context of a 9-5, that means making yourself indispensable or eventually going after that promotion or raise. Plus, consider picking up another out-of-hours gig for some extra cushioning.
Fortunately, you don’t have to go to extremes when it comes to bringing in discretionary spending, which is so intertwined with quality of life. Depriving yourself of putting together cash for a rainy day can backfire significantly, leaving you worse off in the end.
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“You can’t be in a constant state of deprivation.”
“I don’t believe in hardship in any sense of the word,” Dunlap says. “Ninety-nine percent of diets fail because the more you tell me I can’t have fried chicken, the more I want fried chicken. And that’s not willpower — that’s literally a psychological issue. Our brains aren’t working on deprivation.
“And it’s not sustainable in the long run,” Dunlap continues. “You can’t be in a constant state of hardship, so if we’re really trying to build our financial foundation for our entire lives, for six months, a year, 10 years, or 30 years, it’s just not going to work. There has to be a be in balance.”
It’s not that you should stop spending money, Dunlap stresses, but you should stop spending on things you don’t care about — because if you spend money in one place, you may not be able to spend it in another. . That means you have to figure out what you value the most. Which purchases make you most happy?
Keeping a “money journal” for 30 days can help answer that question. Just write down random purchases, note how much they cost and how they made you feel. You will likely see some patterns emerge, and these will help you build a personalized value-based spending system from three categories.
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“You have to be specific in these categories.”
It’s pretty simple: zoom in on three discretionary spending categories that consistently make you happy. Dunlap’s, for example, are travel, food, and plants (she has about 60 of them, she laughs). But that doesn’t mean Dunlap’s entire discretionary budget has to go into one of those three categories — just the bulk of it. “I’ll buy coffee every now and then,” Dunlap says. “I’m going to buy makeup or a new outfit, but those things don’t make me the most happy.
“You have to be specific in these categories,” explains Dunlap. “Entertainment as a category doesn’t work, because then suddenly it’s Cirque du Soleil tickets, a trip to Vegas, coffee and a concert – everything is suddenly under entertainment.” The same goes if you claim “shopping” as one of your categories. Before you know it, you’re buying a new car and a new wardrobe.
The secret lies in specific releases that never disappoint. For example, one of Dunlap’s customers wanted to be able to walk into Whole Foods and buy all kinds of cheese — no matter how expensive — without feeling guilty. Another customer likes vintage clothing and the process of refurbishing and tailoring it.
It’s about honing the little luxuries and “milking them for all they’re worth,” Dunlap says, pointing out that those little things could make even more sense after Covid. “I went to the farmers market yesterday,” she says, “and I bought a bouquet of flowers for $10. And I got to sit there and listen to my podcast while I cut the leaves and arranged them. And that was a $10 purchase. that will bring me joy in the coming week when I see the flowers, but I also need to have this wonderful therapeutic experience.”
Once you’ve chosen your categories, you really need to stick to them. “We can’t do what we all do, where it is, Oh, I didn’t say candy, but I eat a muffin for breakfast. Muffins are cupcakes,” Dunlap laughs, “so you have to make sure you’re not secretly trying to justify things to yourself.”
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“It’s about cutting back, not eliminating it completely.”
But what happens when that recession is finally official and you decide it’s in your best interest to spend less? That’s when a financial plan B — or even C — can come in handy, Dunlap says. Still, that doesn’t mean you should rob yourself completely. Dunlap explains a number of different ways you can effectively reduce overall spending.
“You can save on the necessary expenses,” she says. “So maybe you get sloppy about grocery shopping, stay on a budget, just get the things you put on a grocery list. Or say, Okay, I can afford to live in an apartment that is still safe, but it’s in a different area that costs less money.”
Of course, you can also curb discretionary spending, but not too much. “Tell yourself, I’m not going to completely rob myself because I know that won’t work, but unlike eating out four times a week, I now eat out twice a weekDunlap explains. Or say, I love my Starbucks, but instead of getting coffee every day, I get one every other day. It’s about cutting back, not eliminating it completely.”
Sometimes personal circumstances require even leaner spending, but Dunlap emphasizes that a scarcity mindset isn’t sustainable in the long run, so it shouldn’t be seen as ideal or standard.
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“It’s good to check once a year.”
In addition, Dunlap recognizes that your approach to money will evolve on its own. “With any kind of goal, but a financial goal specifically, it will ebb and shift as you grow,” Dunlap says. “So it’s good to check once a year. What are my financial goals? Do I actually want to buy a house? Do I want to have children? Do I want to start a business? Maybe last year you really wanted to buy a house, and now you’re thinking, It really doesn’t fit my lifestyle anymore.“
That annual audit is also a great time to re-evaluate your values-based categories to make sure you’re still using money as a tool for maximum happiness. You may find that your daily Starbucks habit no longer gives you as much pleasure as it used to and that your money is better spent elsewhere. Or maybe you’ll discover that coffee from is still in your top three categories — and that’s fine too, because value-based spending is all about what you think is worth it.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.