No emergency fund? 7 ways to play financial defense

Becoming intimate with your finances is now a matter of economic survival

As the spread of the coronavirus continues, cities and states are beginning to weigh the benefits of reopening the American economy. With millions of Americans filing for unemployment benefits and record unemployment numbers, unseen since the Great Depression, many are simply trying to survive the current economic standstill.

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As essential living expenses deplete American’s short-term savings, emergency funds, and CARES stimulus funding, people are now forced to tightly manage their finances simply to stay financially afloat. With a stymied economy, short-term cash inflows have become increasingly uncertain.

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Becoming intimate with your finances is now a matter of economic survival.

Here are 7 steps you can take to play financial defense even if you do not have an emergency fund.

1. Adjust Your Budget

According to a recent survey of American households, only 67 percent have a family budget. With the recent economic contraction, knowing your budget, or creating one for the first time, is now essential business.

Whether you are balancing your budget for the first or hundredth time, knowing all your cash inflows and outflows allows you to gain financial clarity.

Writing down your budget, creating a game plan, and executing your goals will allow you to regain control of what can seem like an uncontrollable situation.

Even for those Americans who do not see the benefits of making a budget at this point, the advantages of creating and sticking to a budget are tremendous. It allows you to plan, make decisions, and move forward during times of extreme uncertainty. This reduces financial stress and puts you back in control.

2. Manage Short-term Cash and Payables

As part of the budgeting exercise, get an understanding of both your short-term and long-term financial commitments. This will bring clarity to your financial outlook.

Once you understand how much cash you have on hand, focus on pulling levers in your financial life that reduce the outflow. This involves heavily proactively managing your short-term payables: call credit card companies to allow for deferral of payments or get interest fees waived, negotiate rent payments with your landlord, or talk to your bank to defer car note payments.

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Above all, contract your spending to only items that are deemed necessary to get you through the next several quarters. Cash is at a premium, so remain focused on the short term. By ensuring that you succeed in the short-term, your longer-term financial outlook will be brighter.

3. Liquidate Non-essential Assets

Since focusing on your cash reserves is of paramount financial importance, it may be prudent to liquidate some of your more valuable non-essential assets. Whether you have computers, phones, jewelry, or other valuable merchandise, selling these items can be a great way to generate the cash needed to get you through this pandemic.

Another benefit of selling items that you own is that it can create your needed emergency fund without having to fall into debt. It also allows you to escape the use of short-term credit.

4. Avoid Relying on Credit Cards

One of the easiest ways to float personal expenses when there is a lack of available cash is to borrow money. This often comes in the form of credit cards or short-term lending.

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If you want to be defensive with your finances, avoid using credit cards as a means of financial assistance. The problem with using credit cards is that they tend to have extremely high-interest rates, making the cost of your typical purchases higher than normal.

Even Warren Buffett, at this year’s virtual Berkshire Hathaway annual shareholder conference, marveled at the fact that he struggles to find the returns that credit card companies enjoy. Avoid using credit cards as an economic crutch.

5. Work A Side Hustle

At a time when many people are fearful of their long-term financial outlook, opportunities for working a side hustle are still present. Although it may take some ingenuity and a different setting than a traditional office– virtual work opportunities can allow you to earn extra income to get you through trying times.

As economies begin to reopen and the fog of the future begins to lift, companies will start hiring quickly. Taking advantage of the current opportunities in our digital economy and shoring up your resources as soon possible is a winning strategy.

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6. Consider All of Your Investments

An investor’s portfolio risk allocation should be balanced with current and long-term financial needs. If you have an immediate need for cash, consider liquidating investments for cash.

Depending on your financial situation, you may have access to retirement funds or other sources of savings. There are often fees or potential financial penalties associated with early withdrawal from retirement funds, so do your research. Raiding your retirement savings accounts should only be done as a last resort.

7. Master the Long Game by Winning the Short Game

By focusing on daily, weekly, and monthly financial needs, you can gain clarity about your financial future. Writing down your budget, creating a game plan, and executing your goals will allow you to regain control of what can seem like an uncontrollable situation.

As the broader economy begins to reopen, remain fixated on winning financially over the next several quarters. This attention to the short term will allow you to scale up to long-term financial success.

By focusing on defense today, you will win tomorrow.

Conor Richardson is the author of "Millennial Money Makeover" and founder of ConorRichardson360.com where he helps millennials tackle essential money matters. Follow Conor on Twitter or Facebook.

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