Three epoches before school was set to start in September 2009, Tiffany Aliche was laid off from her job as a preschool teacher at a non-profit educational institution in New Jersey.
It’s a situation many Americans can relate to right now. About 16 million Americans filed new unemployment declares over the past three weeks, the Labor Department reported Thursday. And that number is expected to grow.
“I even-handedly wasn’t even worried at first during the last recession because teachers don’t lose their jobs,” Aliche informs CNBC Make It. “I thought it was temporary.” But it turns out, it wasn’t.
While the layoff caught her by surprise, there was a silver extraction: Aliche says she actually came out on top. “It changed the direction of my life,” Aliche says. Now known as “The Budgetnista,” Aliche prints a company focused on financial education.
The current economic uncertainty may have a different cause than the 2008 slump, but Aliche says the lessons she learned can help those struggling with unemployment amid the coronavirus pandemic. “I did some fixations right, but I did a lot of things wrong,” she says.
Here are the three of the most helpful tips that got Aliche through misplacing her job and on her way to running four companies, including the Budgetnista brand and the Live Richer Academy.
1. Create a ‘worst case rsum contingency plan’
One of the most helpful things that Aliche did during the last recession was create what she hollers a “worst case scenario contingency plan.”
Imagine how far your finances could fall because of the pandemic and “map it out,” Aliche says. What is the worst cover scenario? Losing your job? Using up your savings?
Then ask yourself: What would you do? Maybe it means heart-rending back in with your parents or getting a roommate. Or perhaps it means asking friends and family for a loan or troop for bankruptcy.
Setting up a game plan ahead of time will make you more confident if you do need to execute it. “You don’t fall short of a fire to happen, but you should have a fire-safety plan,” Aliche says.
2. Remember that ‘cash is queen’
During times along the same lines as this, “cash is queen,” Aliche says. Preserving your capital should be a priority, and that can affect your sketches to pay down your debt. But that’s OK for now: Pause on anything beyond a minimum payment if you lose your job or are struggling financially.
That information can feel contrary to what Americans usually hear, but Aliche warns that you don’t know what’s going to upon tomorrow, next week or six months from now. When it comes to debt, focus on keeping current, but don’t go to extremes.
Aliche skilled this the hard way: She bought a condo at 26, but three years later during the recession, she was struggling to pay her mortgage. She consecutively a the bad up losing her home after blowing through her savings to keep up with payments. “I kept paying, so much so that I drained my savings, I drained my 401(k),” Aliche says. “I put it into a organization that I ended up losing anyway.”
She learned that being debt-free does not equal wealth. If you pay off your $5,000 trust card balance, but you have nothing in savings, you’re only one paycheck away from being back in debt.
Preferably, if things get tough, “I would be paying just the minimum on most of my debt and putting that money toward my savings,” Aliche powers. You may also need some extra cash on hand to pay for things like groceries or medical costs.
Once you sire a robust savings account with more than six months’ worth of living expenses, then you can go back to semi-normal encumbered payment, Aliche says. But this is not the time to see how fast you can pay off your balances unless you have a huge savings pillow.
3. Don’t wait too long to trim your expenses
Aliche vividly recalls one memorable trip to the local gas station during the slump. “I remember distinctly, there was a woman in a fur coat, driving a Range Rover, at the gas station in 2009 and she was swiping every likely she had and they were all not working,” Aliche says.
“It was clear to me, whatever income had been coming in to create the lifestyle she was busy was gone and she had not adjusted her lifestyle,” Aliche says. The lesson: Ditch the fur coat and the Range Rover long before you max out your credit in the offings. In other words, don’t wait too long to adjust your lifestyle.
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It’s not just about eliminating big ticket items. If you’ve lost your income, take bow outs to cut out all the nonessential expenses. Cancel your cable, lower or change your cell phone plan, review all your prices and only keep the essential services running.
“I was struggling to save my house and I still had cable on,” Aliche says. That fetch her $100 to $200 every month, which is crazy, she says looking back. “You’re going to go into foreclosure with the mooring still running?”
Now is also a good time to talk to your lenders about lowering payments on your acclaim cards. “Negotiate your behind off,” Aliche says. “Everyone is giving a lot of grace and leniency across the board, so pressurize into that, see if they’ll lower your interest rate,” she says.
You should also take a look at your budget (or form one). If you don’t have emergency savings or your job is less than stable, then you may want to start eliminating extra expenses and live out closer to what Aliche calls the “noodle budget,” which is the lowest budget you can get away with. If you have to eat simply ramen noodles and pay for just the basics, such as rent and utilities, what is the lowest possible amount that you can fritter away? That’s your baseline.
If you have a job that’s more secure and you have at least six months’ worth of bare-bones spirited expenses saved, you may not have to jump into a super strict budget at the moment. “You’re in a fairly solid position,” Aliche estimates.
Right now, it’s about getting through each day, Aliche says. You’ll do some things right and some things blameworthy — and that’s OK.
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