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5/11/2020

The COVID-19 Pandemic Financial Experience Scale | Treading Mode

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Head above water
Where are you on the COVID-19 Pandemic Financial Experience Scale? Working-class people are experiencing this pandemic very differently financially. There are 3 benchmarks on the scale. This is a look at the second benchmark, "Treading."
TREADING MODE
For you, the crisis is disruptive but not destructive. You have some reserves and a safety net. You are experiencing diminished income. You can maintain most of your lifestyle with a combination of reduction of non-essential expenses and subsidies from your stockpiles of food and finances. There are finite amounts of those resources available. Here are some tactics you can use to help you maintain the status quo for a while.
  • Pay your bills on time, especially credit cards, a crucial part of your safety net. Don't leave yourself cash-poor. Cash on hand is a priority in a crisis.
  • Consider forbearances and other payment assistance options. Successful treading requires sustained minimum energy expenditure over time. It not about speed rather endurance. Reducing your outgoing monthly expenses allows you to conserve your cash resources. Be proactive with your creditors. Seek assistance before you fall behind.
A mortgage and other installment payment forbearance allows you to stop or reduce payments for a while. This will enable you to keep those payments in the bank. Those funds become discretionary during the forbearance. They can be used to plug short term spending leaks or added to your emergency fund. That deferred monthly payment becomes a cash cushion for you during this time. Understand a 'deferred payment' doesn't mean a 'never payment.' You will eventually have to make up any deferred payments. 

Credit card forbearances can be tricky. It's all about the interest and how it reports to the credit bureaus. I've heard of some very generous terms. ‘Current balance held at no interest until paid in full as serviced by a minimum payment.’ It is also reported to the credit bureaus as "paid as agreed." If you currently have a statement balance that amounts to an interest-free loan instead of the legally usurious interest rates credit cards charge now. Double-check to see if the terms apply to cash advance balances also. Often you "voluntarily" agree not to use the credit card during the forbearance period. If your credit servicer is not offering generous terms, make your minimum monthly payment during the pandemic. (If you are unable to make your minimum monthly payments, you are in Surviving mode.)

​Keeping your word is paramount in this situation. Do not make commitments you can't keep. You may have to go back to your creditors for additional relief. Broken payment promises may make them less likely to provide help.
  • Invoke austerity measures. Change your lifestyle. Fund needs and not wants. You don't know how long this is going to last for you. Your place in the economy will determine how fast you rebound after the pandemic. No matter your situation, prepare for a long slow recovery and be wrong. Aggressively shed or reduce expenses, especially daily and seasonal energy costs. This may require you to invest in upgraded technologies like LED lighting, Energy-Star appliances, more insulation, or Smart thermostat. When you reduce your energy usage, you reduce your living expenses.
  • Keep your head up. The water-treading survival technique may be executed differently. Still, in this atmosphere of depression, anxiety, and stress, head-up is the way to make it. Self-care is a necessary part of your success. You should not perilously neglect and ignore the impact of the pandemic on your 'being.' And its effect on those you care about the most. Be grateful your head is above water and plan for the future. Sustainable financial well-being should be part of that future. Then do the slow grinding work that treading requires to get you there. Treading builds the knowledge, wisdom, and "#MoneyMuscleMemory" ™ to get there and then stay there. ​

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5/5/2020

The COVID-19 Pandemic Financial Experience Scale| Surviving Mode

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Stressed woman
Where are you on the COVID-19 Pandemic Financial Experience Scale? Working-class people are experiencing this pandemic very differently financially. There are 3 benchmarks on the scale. This is a look at the first benchmark, "Surviving."
​
SURVIVING MODE
This crisis caught you unprepared. You have limited resources anda fragile safety net. Your income is gone. Your lifestyle is in jeopardy. Your standard of living is diminished. You have done all you know to do. The stress and pressure are negatively affecting you, physically and emotionally. You’ve gone from making savings and debt reduction decisions to housing and food insecurity. Your financial focus (time, talent, and treasure) has shifted from working on longer-term goals to money shortage problem-solving. You see very little if any light at the end of the tunnel. Your future looks bleak. You need a miracle. So, position yourself for one. Here is how to activate the power of God in your financial life, on purpose.

Become a hardcore, no turning back, tither of your gross income. Tithing is a covenant between you and God. It is a contract that He offered. It is a lot like those “terms of use” agreements we get when we download a new app. It is pretty much, “take it or leave it.” If you don’t agree, you won’t get the benefits of the app. To get the benefits of tithing, you must sign the agreement. You do that by making a commitment to tithe. Then demonstrate that commitment by your future behavior. If you do that, God promises to meet all your needs. 

The context of this promise is to individuals who had not tithed in the past, like you. Despite that, they were offered a fresh start. That is true for you also. Grace and Mercy will overcome your guilt and history financially. The point is to start and don’t stop.

It is controversial whether the tithe applies to the New Testament dispensation. It is not controversial to me. When I made my commitment to tithe, “I was so broke I couldn’t pay attention.” My conversation with God went like this. “Okay, Lord, You said if I tithed, You would bless me and mine. If You bless me, I’ll go tell it. And if You don’t bless me, I’ll go tell that too.” That was not a threat to God but rather a promise to give Him a Yelp review. That was about 4 decades ago, and I have never looked back or regretted the decision. “Five stars, Outstanding customer service.”

“Blessed” means different things to different people. Here are some of the elements I consider when I say, “I’m blessed.”
  • Things seem to last longer, cars, appliances, clothes have extended life. The less often you have to replace these necessities, the more of your money you get to keep. The longer you can keep your money, the better. Of course, occasionally you have to do some maintenance on older cars and appliances. Repairs cost often had less long-term budget impact than paying for something newer. Especially when I was prepared for them with an emergency fund. (This observation doesn’t apply to your children’s clothes. They just outgrow them. But it may work for some hand-me-downs.) 
  • My money wisdom increased. I got smarter about using my money and other resources. It required an effort to start tithing. Taking 10% of your gross income from your net, take-home-pay, when you are already behind on everything, is a daunting challenge. Learning to do so brought wisdom through trial and error and self-education. “Experience is a hard teacher because she gives the test first, the lesson afterward.” -Vernon Law
  • Opportunities for income were available. These opportunities were often relative to my place in the economy and my ability to see the opportunity. 
  • The tithe helped anchor my faith. That consistent behavior created tangible consistency for me, a quid pro quo.
  • I have always had my daily bread, and my needs met. My wants are satisfied, not all the time, but most times.
Organize your financial records and accounts. Miracles of provision require orderliness and a gift. These two factors, order and a gift, are present before God’s miraculous provision in Biblical accounts. Before a miracle of provision manifests, there must be order. Jesus had the multitudes seated before the fishes and loaves where distributed. The widow provided for Elijah in a famine, and God supplied her daily. The nation of Israel collected the manna in a prescribed manner. Your tithe is the gift. Now get your finances organized.

Get your eyes off the promise and turn them toward the Promise Keeper. Now that you have started tithing, you rightfully expect a return. However, tithing is not an investment. Your focus should not be on the timing and size of the promised return. Instead, your focus should be on pleasing God. Remember, He provides daily.

Be wary  of those who preach to your desperation and not to your faith. Tithing requires you to give your money away. Where you give your money is important. Because of the prevalence of “prosperity preachers and  famine feeders” making appeals, the tithing message can be easily distorted to appeal to your need. Give to them, and you will receive, you are told. That appeals to your need. You don’t give to get, no matter how great your need. You give to honor God. Your motive is just as important as your behavior. When you give, be sure it is for the right reason and not because of a compelling appeal.

Miraculously changing your financial life requires a change in behavior. Behavior changes are not easy. Changes of behavior require commitment. Commitment is demonstrated by behavior. Tithing is a behavior. And just like with exercise and oral hygiene, consistency is what brings long-term results. 

​The COVID-19 pandemic has forced you into a desperate situation. Your options are few and dwindling. Your situation seems beyond your capacity to solve. You need a miracle. Position yourself for a lifetime of miraculous provisions by being a hardcore tither. What have you got to lose? You don’t have enough to make it now, anyhow, right? Honor God with your tithe and experience His provision and more. True, you don't have to be a tither to be blessed by God. However, I have never seen a tither not blessed by God. No, not one.

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4/14/2020

6 MoneySmartLife COVID-19  Financial Comeback Strategies

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The COVID-19 pandemic has affected every American family. The severity of the impact varies based on socioeconomic and demographic factors. For most working-class people, the result will be short-term economic devastation due to the loss of income, health benefits, and savings. It does not matter where your family is on the pandemic financial disaster scale, The pandemic left working-class families worse off. The economic toll has yet to be calculated. 
At the time of this writing, the economic situation is very fluid. Without income, families are in housing default or food insecurity. The longer it goes on, the more widespread the economic suffering will be. The final impact on your family’s financial well-being may be unknowable and out of your control. What is in your control is resilience.
Resilience is an integral part of financial well-being. As any world-champion prizefighter would tell you, “It is not just how hard a punch you threw; but also how hard a punch you took that matters.” Stuff happens in life all the time. We don’t know its name and duration until it happens. “COVID-19 pandemic” is this large steaming pile of stuff’s name. And when stuff happens, you have to deal with it. To continue to torture the prizefight analogy, “In life, it is not that you got knockdown. Instead, it is how long you stay down and what you do after you get up that determines the outcome.” 
So no matter how hard you got knockdown. Get up. Here is how.
1.  Start Planning Your Comeback Now While You Are Going Through. Focus on what you want your life to be. Set short-term recovery goals. What do you have to do to keep your vow “not to be caught like this again?" Start or add to your Emergency fund..  Restock or build your Food bank. Build and improve Relationships with members of your safety net. Vote. Engage with all levels of civic government. Understand the impact of civic appropriations and taxiing decisions and whose interests are benefited by those decisions. Then vote your interests. Local, state and the federal government should be run competently with an adequately resourced staff of honest public servants. Also, there should be citizen oversight with political and criminal accountability.

2.  Stay In The Moment. Every day has its own supply of challenges and joy. You can’t know the future, good or bad. Don’t create horrible future mental scenarios. Focus on making informed good choices now. The right decisions lead to good outcomes. Why worry about tomorrow? Doing so will not add an hour to your life. Matt 6:34 

3.  Believe In Yourself. You can do this. You don’t have to know every step of how. Just do the best you can each step of the way. Remember, you are playing a long game. Your outlook is post-pandemic. Don’t let a short-term decision lead to long-term financial turmoil.

4. Trust in God. If you believe He provides, then face each day with confidence.

5.  Give. Don’t be so inward-focused. Turn your attention outwards and help others less fortunate than yourself.

6. Maximize Self-Care to mitigate the stress and depression that your situation fosters. In every airline pre-flight video, you are instructed to put on your own oxygen mask first. Only then help others in the event of a loss of cabin pressure. Money troubles increase pressure. You must find a way to release it before hurting others, generally those closest to you.


For additional information on mental Resilience.

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2/9/2020

Manage existing debts and Has access to potential resources | Financially Healthy Behavior

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man holding savings bank
Your behavior is one crucial factor that determines your financial well-being. It is not just what you know to do, but what you actually do that counts. Knowing you must save for retirement is different than saving for retirement. Knowledge should inform behavior not to be a substitute for it.
The next behavior in our look at six financially healthy behaviors is managing existing debt and has access to potential resources. This is your skills and ability to control your debt. And your capacity to generate outside resources in times of need. Let’s take a look at each.
Manages Existing Debts
  • “A manageable debt load is one in which the individual is able to keep up with associated debt obligations without experiencing significant stress.” This includes formal debts like credit cards, student loans, car loans, etc. It also includes informal debts to family, friends, and others in your social network.
  • Your debt load is different than your living expenses. Yes, they are all “bills that gotta be paid. True dat!” But living expenses are results of your living and consuming. In contrast, debt is a “voluntary” surrender of future time and earnings. Both are cost obligations, but here we are only talking about your debts.
  • The characteristics of a well-managed debt load are:
    • you are paying your bills on time, every time.
    • you have discretionary income left after debt service payments. Paying your “bills” shouldn’t take all your money.
    • your overall debt load is consistently being reduced.
  • Managing debt effectively in our consumer-based “buy now-pay later” advertising saturated ecosystem requires you to develop a visceral aversion to debt. Change your default programming to be against adding liabilities to your balance sheet. Refuse to encumber another minute of your future by promising payments. The best-managed debt is no debt at all.
  • How you pay your debts now impacts your future ability to borrow money from both formal and informal sources. A weak or erratic payment history limits your ability to borrow from those same sources again. While a good payment history will often be rewarded with an increased credit line and expedited access to resources.
Has Access To Potential Resources
  • In times of need, a person should be able to gather potential additional resources by calling on external formal and informal sources. Those sources determine your financial and social lines of credit, i.e., how much you can borrow. Potential social and economic resources should be cultivated before needing them.
  • People often depend on their social networks to help weather a shock even if when they have access to formal financial products. Social capital that can be converted into resources when needed is especially crucial for those with credit score challenges or less responsive financial institutions.
  • Your social network requires vetting. Who do you believe is part of your safety net? Who will you depend on and come through for you during tough times? Do they agree? Since reciprocity is often implied in these relationships, who regards you as part of their safety net. Do you agree?
Managing debt and cultivating credit lines are MoneySmartLife behaviors and skills necessary to acquire on your journey toward financial well-being.
​

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1/13/2020

Balances income and expenses Financially Healthy Behavior

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The next financially healthy behavior in our series is “balances income and expenses.” Balance is a state of being. We strive to achieve balance in life. When it comes to money, there is much to balance. Wants vs. needs; long-term goals and short-term goals; security vs. risk-reward; retirement savings vs. spend now; debt service and discretionary income; etc.
​
Imagine yourself standing in the middle of a long plank balanced on a large ball. One side is expenses, and the other is income. Your spending choices and realized income opportunities determine how much is added to each side of the plank. The ball represents macro-economic factors that may change. Your goal is to maintain balance.

Maintaining your balance requires constant motion. Balance doesn’t necessarily need equilibrium to be successful. Maintaining balance involves attentiveness to details and mini-corrections. Add some to one side or take from the other. Repeat as necessary.

The sides of the plank are not equally weighted. The expense side of the plank is weighted from birth. Humans are an expense from birth to economic viability. Economic viability is when a person is contributing more in value than they are consuming in resources. This even applies to trust fund babies. But they also come with a preloaded income side.

It is easier to maintain balance than it is to achieve it initially. From birth, most working-class families, especially the legacy dispossessed, are crawling up the expense side of the plank trying to attain balance. Unfortunately, they must make that journey through a hostile environment. One filled with “trick and trap” financial services (payday loans), targeted economic disinformation (debt consolidation), and the need to make sophisticated financial and investment decisions (401k). Many are ill-equipped to do so. The financially ill-informed are the prey of financial services predatory capitalists. “Experience is a hard teacher because she gives the test first, the lesson afterward.” Vernon Law.

Trial and error is not an option for most. Recovery is often not easy from such money lessons that extract resources from the already low-resourced, which could also lead to foreclosure or bankruptcy. Additionally, there are extended periods of imposed financial purgatory, effectively barring access to other products and services. These higher standards and lower limits for future borrowing are imposed over a lifetime. The reason there are no non-white Walt Disney or Donald Trump is non-whites don’t get the chance to have multiple bankruptcies. It is one and done. Win or go home. Rather win or lose your home.
​
Here are some things to help you balance income and expenses:
MAXIMIZE INCOME
  • Find recession-proof side hustles that fit your goals and lifestyle. Then turn it into a consistent source of revenue. Treat it like a business, and it will reward you.
  • Stay favorably positioned for a raise to increase your income from employment. 
    • Valuable employees can get a raise even in bad times
    • Job performance should be inarguably top-notch
    • Career growth should be focused on lifestyle compatibility, not just income
  • Embrace continuous education. Learn in-demand marketable skills. Stay ahead of the job growth curve by learning skills that have increasing future demand.
  • Create intellectual property. Then monetize your gift.
REDUCE EXPENSES 
  • Lifestyle costs are the most substantial opportunity for most households. Deciding how you want to live and who you want to live around will make a big difference in your expenses. Lifestyle changes are either voluntary or forced. A job promotion or bonus gives you lifestyle upgrade options. Layoff forces lifestyle changes and hard choices.
  • Debt service pre-determines how you will spend future earnings. The less of your earnings dedicated to debt services means more free time for you. Since you “don’t have to work them hours to pay that bill no more.” Now you get to choose how to invest those hours.
  •  Energy usage is a sustained drain on household resources and a necessity of modern life. Use wisely and waste not. Pro-actively monitoring energy consumption will help motivate conservation. Upgrade to energy-efficient technologies (LED bulbs, smart power strips, Energy Star appliances, programmable thermostats) sooner rather than later to minimize waste.​
“Balances” does not mean income equals Expenses. There are seasons when you may willfully participate in imbalance by adding additional expense. Another season where you increase revenue. The key to sustainability is to consistently over time have more come in than goes out.

Financially Healthy Behavior Infographic

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    Mansa Musa is a homeownership counselor and homebuyer educator. He is currently the Principal at MoneySmartLife.org. He blogs and speaks on subjects of financial well-being and financial capability. Helping working class families live a sustainable MoneySmartLife through pragmatic solutions and behavior changes.

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