Living from Paycheck to Paycheck: How to Get Out of the Cycle

For the first several years of our adult lives, Sarah and I lived paycheck to paycheck. Most of the time, we would have been unable to pay our bills when they were due if our next paycheck didn’t safely arrive in our account right on schedule.

From a super short term perspective — on the order of hours and days — it made sense. We had money in our account. We wanted something. We went and bought it. Our next paycheck would help us deal with our bills, so we didn’t worry about it. Still, if we ever stepped back and looked at a wider perspective, it was disastrous.

We had no emergency fund. If a real problem came up, like a car not starting, we were in a real jam.

We had extremely limited domestic skills. We didn’t know how to prepare many meals because we rarely ate at home, and everything seemed difficult and time consuming.

We didn’t know how to repair basic things, so something like a toilet problem meant a panicked call to a landlord and soaking a bunch of our clothes.

Basically, we just threw money at domestic problems like food — we usually went out to eat, got takeout or made super-simple convenience meals, all of which were expensive — and basic repairs. We’d call the landlord for simple things, and our inability to repair things caused damage to our own stuff while we waited — plus it made life really inconvenient and unpleasant at times.

We walked a professional tightrope. We were so dependent on our next paycheck to keep the bills paid that we were both afraid to rock the boat at all at our workplace, and thus our supervisors could demand ridiculous things from us. Job searching was fraught with danger because we couldn’t handle getting fired from our old job while we were interviewing for a new one.

We were making zero progress toward our long term goals in life. We weren’t saving for a house down payment. We weren’t saving for our next car. We were making minimum payments on our debts and often racking up more credit card debt. The one good thing we did was start our retirement contributions early, something that a few mentors strongly encouraged us to do, and we did simply out of trust and respect.

Every single one of those things added additional stress to our lives. Not only did these events themselves cause stress when they happened, but they also added stress if we thought about them much. Often, we avoided thinking about them — if we got too stressed, we’d just spend money on something to distract us.

That was our reality for our first several years of our adult professional life. We lived paycheck to paycheck. And that description of life above? It’s got a lot in common with how most Americans live.

The shocking thing is that the vast majority of Americans also live paycheck to paycheck — somewhere between 75% and 80%, depending on how you count it. Most people would hit serious financial troubles if their next paycheck didn’t arrive in full and on time.

How did we break out of it? I’ve written before about our own story, but today I want to step back and generalize it a little, turning it into some practical steps that almost anyone can take to get out of their own paycheck to paycheck lifestyle.

But first, let’s address the why.

Why should someone want to get out of paycheck to paycheck living?

If you break away from living paycheck to paycheck, meaning that you are consistently earning more than you are spending, you wouldn’t suffer any ill effects if you missed a few paychecks (aside from having to withdraw some money from a savings account), and you’re making progress toward your biggest life goals, almost all of the negative things mentioned above go away.

You’re no longer scared to death at work. While it might not be super convenient, it’s no longer the end of the world if you lose your job. You can survive for a while without it, giving you time to find another one. This frees you up to take less abusive behavior at work and also makes searching for another job a lot less scary.

Most life emergencies are no longer stressful disasters. Most things, like a car issue or an emergency trip or even a sudden job loss, aren’t apocalyptic any more. You’ll still be able to pay the bills. You’ll be able to handle the sudden expense. It’s not a problem, just an inconvenience.

You’re actually moving toward big life goals. You’re saving for retirement. You’re saving for a down payment. Those things are actually moving toward reality instead of being nebulous dreams, and that feels great.

You’re less scared to try new things, because you can handle the downside of a small failure. You become more willing to try new things and do more things for yourself because the worst case scenarios become a lot less disastrous. If you try fixing that toilet and it doesn’t work, it’s not too bad because you can handle the costs of any issues you might cause. This encourages you to try doing those things, which means that you start to feel less worried and more confident about all kinds of things in life.

A lot of everyday stress just goes away. All of this is good, but one of the biggest benefits is how it all adds up to a lot less everyday stress. For me, it actually cleared up some minor health issues, and it definitely made day to day life better. I was a lot less jumpy and emotionally touchy once we got away from paycheck to paycheck living, and the same was true for Sarah. Life was less stressful and more enjoyable.

Yes, breaking away from paycheck to paycheck living means making sone changes to your life, but even those aren’t as bad as they seem initially. Often, we’re afraid of change just because it’s a change in routine, not because it’s actually bad. We visualize horrible outcomes because we’re creatures of habit.

Here are some strategies for breaking away from paycheck to paycheck living that can work for almost everyone.

The first step is consistently earning more than you’re spending.

Almost every month, you have to be bringing in more money than you’re spending. There are a lot of ways to accomplish that, but if you’re not doing this month after month after month, you simply can’t get away from paycheck to paycheck living.

You have to spend less than you earn during normal months as well as months where there are some smaller unexpected events. Yeah, there are sometimes disaster months where everything goes wrong and you do have to spend more than you make, but those should be rare and you should have savings to tap (we’ll get back to that later).

This can be incredibly difficult, especially if your income is very low. You are likely going to have to make some tough lifestyle choices. Here are some things to think seriously about.

If you pay for medicine or other medical services, can you ask about lower cost options? There may be options that will work for you that require less expense out of pocket. Are there things you can do at home on your own? Are there less expensive prescriptions or can some of them be eliminated? It doesn’t hurt to ask.

Can you live in a different place that has lower expenses per month? This might mean living with a relative or renting a place with multiple roommates. Your goal should be to significantly reduce the monthly expense of keeping a roof over your head.

Can you drop your entertainment subscriptions? Do you have cable television? Do you have cellular data for your cell phone? Basically, if it’s a monthly service you have, consider significantly reducing it or dropping it. Switch to a low end phone with no data from an inexpensive service like Ting.

Are you eating an inexpensive diet with very little or no food from restaurants? A truly inexpensive diet is one that almost entirely consists of foods you prepare for yourself, mostly made up of inexpensive staples like rice, beans, pasta, peanut butter and so on. Your food intake should be modeled on that and should involve very little or no money spent at restaurants. When you’re out of the home, you should be taking meals with you so that you’re not tempted to eat at restaurants.

Are you signed up for all assistance programs you’re eligible for? If you’re struggling with a very low income, make sure that you’re getting the benefits of any assistance programs you’re eligible for. They can make an enormous difference. You can get started by contacting your state’s Department of Human Services — look them up online and give them a call. They can help you identify programs that can help, from local food pantries that can get food on your table, clothing pantries that can keep clothes on your back or assistance with medical costs.

Can you earn more by taking up a part time job? If you’re really struggling financially but working less than 40 hours a week, consider adding a part time job to the mix to bring in more income. Twenty hours a week at $10 an hour is another $200 each week, which can make a big difference to a person’s finances.

Can you ask your boss for a raise or for more hours? You’re likely to have more success with this if you’re always on time at work, deliver things by their deadline with high consistency, and have good results and performance reviews. If you’re not doing that at work, aim to start.

Can you give up some vices? If you smoke, consider dropping the smoking habit. If you drink, consider dropping the drinking habit. If you use drugs, consider dropping the drug habit. If you compulsively buy anything, break that compulsion.

Are there better “bang for the buck” options for how you spend for nonessential things? For example, you can get a lot of free entertainment from the movies and books available from your local library rather than buying books and paying for Netflix or cable.

Can you reorganize some of your debt, particularly credit card debt and student loan debt? Consider consolidating your student loan debt, particularly if you can lock in a lower interest rate and a lower monthly payment. Also, consider doing credit card balance transfers in order to reduce the interest rate on that debt. While it’s a good idea to lower interest rates, it’s a bad idea to get collateralized debt like a home mortgage to pay off non-collateralized debt like a student loan or a credit card. If they can’t repossess, don’t turn that debt into something they can repossess.

What about small steps, like buying only store brand household supplies? There are many, many little things you can do to trim a bit off your spending.

Remember, the goal here is to stabilize your income and spending so that you’re consistently spending less than you bring in each month. These changes are intended to bring permanent changes to your spending and income that should bring you closer to that target. Many people simply overlook these things, even though they’re obvious, and just assume that they can’t make it work. You can do this, no matter what your income level is.

When you’re making more than you’re spending, start doing something smart with the difference.

For us, cutting back on our spending was really only half the battle — or less than half. A big part of our challenge was to start doing something wise with that extra money when we started to really see the impact in our bank account.

We were so used to just spending any extra money in our checking account that while our life changes caused more and more extra money to appear, we were still very tempted to just spend all of it.

Our solution was to simply do something wise with any surplus we found in our checking account as soon as we discovered it, and to eventually automate those things. I’ll get back to automating in a second.

What kind of wise things did we do? Here are some suggestions, in order of priority.

Sell off some unused stuff to give yourself a head start on this list. Look through your closets and your rarely-used belongings and see if any of those items can easily be sold off. Take them to Craigslist or to local community buy/sell/trade groups on Facebook and turn those items you likely won’t use again into some cash. Use the cash for some of the items on this list to give yourself a nice running start.

Build up enough of a buffer in your checking account that you’re no longer at any significant risk of overdrafting. One expense that can often hound people who are living paycheck to paycheck is overdrafts. If you are regularly overdrafting your checking account, you’re frequently getting hit with fees of $35 or more and those can really add up and hurt. Your first step should be to put yourself in a situation where those don’t happen. Aim to have a constant buffer in your checking account of a few hundred dollars so that you don’t accidentally overdraft your account. For example, some people view a balance of $1,000 as being their “zero balance” and aim to always stay above that. Consider having a “zero balance” of $300 or $500 where your goal is to always stay above that number, no matter what.

Get caught up on your bills so that you’re no longer facing late fees. Once you’re out of the danger of overdrafts, aim to get caught up on all of your bills so that you’re no longer generating late fees. You should aim to pay all of your bills on time, both to avoid the direct expense of being late but also because being late consistently can have a negative impact on your credit score, which can then cause you to have worse interest rates on loans and even affect job applications.

The simple act of getting yourself away from overdrafts and late fees can make a huge difference in a person’s day to day financial life and can be a major milestone in terms of moving away from paycheck to paycheck living, but there are many more things you can and should be doing. Here’s what to do next.

Have an emergency fund in a savings account. An emergency fund is a pool of cash that you can tap in an emergency situation, so when an unexpected event occurs you have the money available to deal with it easily. You want an emergency fund that’s going to be available in all kinds of emergencies and safe from many disasters, and the best option for that is cash in a savings account at a bank where you have local branch and ATM access. It’s not a bad idea to use a different bank than your regular one so that you’re not tempted to tap the savings account every time you use your bank card. Whenever you have spare cash in checking, move it over to this emergency fund, out of sight and out of mind until there’s an emergency.

Pay off your debts, starting with your highest interest debt. Your highest interest debt is the one that’s costing you the most in interest, so pay it off first. Simply take extra money in your checking account from the smart spending tactics above and make an extra payment on that debt. If you pay it off, great! That’s one less minimum payment you have to deal with each month, and now you can tackle whichever debt is now the highest in interest rates.

I suggest focusing on these two steps until you have an emergency fund that’s at least equal to two paychecks and you’ve eliminated all of your debts with a higher interest rate than 10%.

Consider automating your positive financial moves. By this, I mean that you instruct your bank to move a certain amount each week or each month into your emergency fund, or you set up an automatic monthly payment toward one of your debts that’s bigger than the minimum payment, or you set up an automatic contribution into your retirement plan. For that kind of thing to work, you have to be consistently spending less than you earn such that your checking account is growing over time.

The advantage of automation is that you don’t have to remember to do something with that money and you don’t have to talk yourself into doing it each week and each month. It just happens. The only thing you have to worry about is making sure there’s always plenty in your checking account, which is why it’s a good idea to carry a buffer in there.

Start saving for major goals coming in the future. For most people that means saving for retirement. For some, it can mean other goals, like saving for a house down payment, saving for your next car or saving for a child’s education. At this point, your choice of goals is highly dependent on what you want out of life, but I will say that saving for your own retirement is never a bad option. You will virtually always be glad you did that.

Saving for retirement is quite easy. Most Americans are eligible for a Roth IRA account, which is kind of like a special savings account for retirement. One big difference is that once you put money into that account, you get to choose what is done with that money — a good all-around option is to just choose a target retirement fund. Money put into a Roth IRA can be withdrawn without penalty if you need it later, but the money earned in the account cannot be withdrawn without taking a penalty. However, if you wait until you’re at retirement age, the money earned in that account can be withdrawn without any penalties or income taxes. Yes, this is a way to make money without paying taxes on it if you’re willing to wait for retirement on that money.

It’s all about a lot of individual small steps adding together to make a big leap.

Almost all of the individual moves in this article are simple ones, and many Americans can do many of them with ease. The trick is actually doing them. People are often resistant to making changes in their lives and these steps represent change. However, if you want something different in your life, you have to start doing something differently.

These steps work. They were transformative for Sarah and myself. We don’t earn an exceptional income — neither of us have earned six figures in our lives, other than a couple of really exceptional years where we were buried in work, and we have three children at home. Still, we were able to follow steps like these and escape paycheck-to-paycheck living, and then build on that to pay off all of our debts, buy a home for our family and pay that off, too, over the course of about six and a half years.

It starts with simple daily changes that get you in a position where you’re spending less than you earn before making smart moves with the difference. Before long, you’ll leave paycheck-to-paycheck life behind.

Personal Expenses: How to Track Them

Once every few days, I open up a spreadsheet on my computer that I’ve been using for many years. Into that spreadsheet, I type in several lines of information — places where I’ve spent money, how much I spent there, the date I spent that money and what type of expense that was. Once I type those things in, a few automatic calculations occur and I have a nice view of my expenses over the last 30 days, the last year and since I started tracking such information.

It’s a nice little system, one that I’ve customized for my own needs over the years (I was a software developer in a previous stage of my life, so doing this kind of thing is kind of second nature for me), but many of the ideas are borrowed from some commercial software packages.

I consider it one of the most powerful things I do in terms of keeping my spending in check. Why is that the case, though? And how exactly do I do it?

Here are six reasons why you should be tracking your personal expenses.

1. Tracking your expenses helps make you more mindful of spending in the moment.

Once you get into the habit of tracking your expenses, you’ll find that the process makes you more mindful of the spending choices you make throughout the day. You’ll begin to associate things like, say, that $5 stop at the coffee shop with the impact it has on your total spending at the end of the month, and that will motivate you to find a cheaper solution or to cut back on a habit that really adds up.

It’s simple repetition, really. The more times you look at and think about a particular type of expense and the big impact it’s having on you, the more likely you are to think of that expense with a more critical eye.

This doesn’t mean that tracking expenses will cause you to never spend money on anything fun ever again. Rather, it will simply make you more mindful of those expenses. There might be times where you recognize you’re not getting a whole lot of value out of a treat, but at other times, it’s something that’s really worth your while.

2. Tracking your expenses helps you to see spending mistakes before they become disastrous personal finance problems.

One of the biggest reasons that people find themselves in financial trouble is due to overspending. People simply get into a routine of spending as much as (or more than) they earn. Because of that, it becomes very difficult to achieve any long-term financial goals and, if any sort of unexpected events occur, it can be disastrous. The truth is that just shy of 80% of U.S. workers live paycheck to paycheck.

While it can be easy to point to one or two big expenses that lead to overspending, it’s often a myriad of little expenses that are the true culprit. It’s easy to pick out that $100 expense, but 10 expenses of $10 each can often go without much notice. It’s only $10, after all, but if that $10 happens again and again, it can add up swiftly.

Tracking your expenses can expose overspending of all sizes, and if you do it diligently, expense tracking can identify when it’s a small issue before it becomes a larger issue where you’re struggling to make ends meet.

3. Expense tracking provides the backbone for a workable and sensible budget.

Many people associate “financial responsibility” with “making a personal budget,” but the truth is that a good workable budget is built on top of an accurate picture of your spending, which you can really only build through tracking your expenses. Everyone has different spending habits and routines, and simply plopping a ready-made budget on top of your individual habits will almost always result in disaster.

Rather, a good budget starts by taking a deep look at how you’ve been spending your money, sorting that spending into sensible categories, and setting some modest goals for some of the more flexible categories.

For example, if you spend $200 on your hobbies each month, $150 is a sensible amount to budget for that category, but you don’t know how much you’re really spending — and thus how much to budget — without tracking your expenses along the way. Knowing your actual spending lets you make realistic budget numbers that can really help you make positive financial progress.

4. It can improve your relationship with your partner.

Money is one of the most common sources of disputes between couples, and it often boils down to spending habits. If one partner spends more on non-essentials than the other partner, it can easily lead to friction, particularly when that non-essential spending is causing other financial problems.

Tracking your expenses is a very powerful way to not only get a clearer view of your own spending blind spots, but it can also provide useful information in money conversations. A simple record of where the money went can reduce a “he said/she said” dynamic down to actual numbers.

While it can’t solve all financial disputes, it can go a long way toward helping both partners identify spending problems without resorting to accusations and anger.

5. It makes it much easier to set financial goals.

A final advantage of tracking your expenses is that doing so makes it much easier to set financial goals for yourself.

You can easily set specific spending targets for yourself, such as capping your spending on a particular hobby to $50 a month. This is basically akin to budgeting, which is really just a form of financial goal setting.

However, the real advantage of setting spending goals like that is that completing those goals frees up money for bigger financial goals in life. If you are able to trim $200 a month from your spending across several categories, then you have $200 each month with which to get yourself caught up on your bills, get out of overdraft cycles, establish an emergency fund and start paying down high-interest debt.

It’s all about tracking your finances.

6. Tracking your expenses can kill financial stress.

One of the biggest sources of financial stress for most people is the eternal question of where all of the money went. A paycheck comes in and it seems like you’re flush with cash, but a few days pass and the account seems practically empty. What happened? Tracking your expenses answers that question.

Tracking all of your expenses means you know where every dime of your money is going, and that changes the question from a stressful mystery to something clear and understandable. Rather than feeling like everything is out of control, it transforms the question into one of personal decision-making, something that’s far less stressful.

In short, tracking your expenses returns the sense of control over your finances to you. You’re no longer just along for the ride on a financial roller coaster.

Getting started with tracking your expenses is quite easy.

The most straightforward way to get started is to simply write down all of your expenses in a notebook. All you need is a cheap spiral notebook and a pen.

When I first started tracking my own spending, I did it with a simple pocket notebook and a pen. Whenever I spent money on anything, I either jotted it down in that notebook immediately or I stuffed a receipt in the pages of the notebook.

I noticed several things quite quickly. The big one was that I didn’t like writing stuff down in the notebook, not because it took effort, but because doing so meant I had spent money on something and I would have to reckon with that spending later. With a lot of frivolous expenses, I didn’t want to have to reckon with it later because I knew, on a deep level, it was a bad decision.

What does that look like for you? Whenever you spend money, save that receipt, and once every day or two, write down every single item that you spent money on — the date, the item and the amount. You can (and should) also give it a category. You might find it easy to just use categories like “food,” but I take it a bit further and use categories like “basic food,” “eating out,” and “gourmet food” to differentiate between needs and different kinds of wants.

When I’m recording expenses, I go through grocery lists and group all of the items into “basic food,” “gourmet food,” (meaning food at the store that had a cheaper alternative) and “household supplies” by using a highlighter. I do the same for all multi-item receipts. Then, I just add a new item entitled “Food at grocery store” with the category “basic food” and the total, then another item entitled “Food at grocery store” with the category “gourmet food,” then another item entitled “Supplies at grocery store” with the category “household supplies,” and each one has the total cost of the items of that type from the receipt.

There really isn’t a good list of categories with which to sort your spending. Just come up with ones that make sense to you. You might want to just start writing them down now and leave a space for categories, then when you have a few dozen entries, come up with categories and categorize the expenses then.

I find that there is a lot of value in doing this by hand. It really helps me keep in touch with my spending in a way that just typing data into digital tools doesn’t achieve, and I find tools that automatically fill in the data to be even less impactful for me. They’re still useful, but writing it down just hits home in a deeper way.

Speaking of automated tools, there are three tools that I recommend depending on how you want to approach things. I personally do not use any of these regularly (though I’ve tried them all), mostly because I feel uncomfortable using third party tools to directly access my financial accounts, but that’s not because they’re actually insecure in any way. I just choose to minimize the number of online accounts I have that have any access to personal data.

The easiest one to use — but the one that feels the most hands-off and least helpful overall to me — is Mint, which automatically retrieves data for you from your accounts and displays it in an app. It’s free and really easy to use, but I find that it spends too much time offering me suggestions (and ads) that are irrelevant to what I want to see.

A much better option is a subscription service called You Need a Budget, which I consider the best all-around automated budgeting and expense tracking tool out there. It also retrieves data for you, but you can enter a lot of information yourself to supplement that, and it offers a lot of genuinely useful views of your data.

If you’re kind of a spreadsheet wonk, I’d like to give a nod to Tiller Money, which integrates with Google Sheets to automatically pull data from your accounts into a spreadsheet.

Once you have a month or two of data, you can start making some powerful decisions.

The actual process of recording your expenses is a powerful thing. It serves as a strong constant reminder of where your money is actually going, something that can shape your thinking as you’re recording it.

When you start to accumulate a lot of spending data, however, it becomes even more powerful. The collected data enables you to take a step back and look at your broader spending patterns.

With a month’s worth of data from tracking your spending, you can easily ask questions like, “How much money did I spend last month at coffee shops?” or “How much money did I spend last month eating out?” or “How much money did I spend last month on entertainment purchases?” The answers to those questions — and many like them, depending on the categories you’ve chosen — can really shape your thinking when it comes to spending choices.

The realization that you’re spending hundreds a month at coffee shops, $1,000 in the last month eating out at mediocre restaurants or $350 on hobbies can be a real eye-opener. Not only does it show you where your money is actually going, it can help you to realize that your money is going towards things that aren’t providing a lot of value in your life for the amount you’re spending.

When you add up your spending in each category for the month, what you’re doing is creating the backbone of a budget. You can go through all of those categories, figure out which ones are reasonable and which ones are ones where you’re overspending and can cut back, and then use those actual numbers to create a basic budget for yourself.

This whole process reveals a deep truth about budgeting. The real value of budgeting isn’t in creating neat charts and tables, but in the fact that it can identify a few of your worst spending areas and help you get better control over them. It’s not in a chart, but in how that chart changes your behavior.

For most people, a budget is going to reveal some areas of overspending on non-essential items, which you can cut back on by choice, as well as some areas of essential spending that you’d like to cut back on (like trimming bills). While earning more money is always a great solution to this problem, it’s not an immediate solution; thus, the immediate tool at hand is frugality.

One good way to start is by trimming your required monthly bills. Here are 40 tactics for trimming your ordinary monthly bills, as well as some common bills that people can delete entirely. Ask yourself whether each bill you have is necessary and, if it is, ask yourself how you can cut that bill back a little. A good first step is to simply call that company and see what can be done to make that bill smaller.

The other approach is to cut back on your non-essential spending. It’s worth noting that I think it’s a bad idea to cut non-essential spending to the bone. If you trim out all of the stuff you enjoy, you’re going to quickly resent the changes. Rather, you should try to identify the 20% (or so) of your non-essential spending that’s least important to you and cut those things, while being mindful of what you’re gaining as a result of those cuts. If you spend $400 a month eating out, see if you can trim that to $300 by cutting out the $100 spent on the most forgettable meals. If you have some expense you just don’t want to cut, look for some other expense you can cut back on a little harder.

Tracking your personal expenses takes a bit of time, but it’s a powerful nudge toward smarter spending and better financial choices.

Tracking my spending was one of the best things I started doing during my financial turnaround. It gave me a little constant nudge to avoid spending money on frivolous things and soon revealed some of my worst spending habits. Understanding the areas in my life where I was overspending — and simply knowing where all of the money was going – was a transformative change in my financial life.

Get started today. I recommend doing it by hand at first, simply because of how powerful that act is in terms of getting you to notice your expenses. After you build up some entries, start looking at the patterns and see what they’re telling you about sensible changes you can make to your spending. It does take a bit of time, but it can have an enormous impact on your use of money.

How to Cleverly Save Money for the Unexpected

Over the last week, I’ve heard tons of questions and participated in lots of conversations about COVID-19. The topic of COVID-19 itself is pretty far outside the realm of what is covered on The Simple Dollar, as it digs deep into health care and public policy issues and The Simple Dollar sticks to personal finance and frugality issues. However, whenever there is a major societal challenge, there are financial and frugal impacts for all of us.

So, let’s discuss them.

In general, I tend to stick to the same basic principles in life through thick and thin. Rather than altering what I’m doing radically because of a crisis or a disaster, I try to live my life so that a crisis won’t upend things — or will alter things as little as possible. Thus, almost everything I describe below are things that I normally do during normal times and during moments of crisis. These principles and strategies are ones that I repeated during the financial crisis of 2008, during the severe flooding that rocked the area around where I live in 2010, and I’m using right now, too. They’ve helped during a lot of personal crises, too. I expect that these principles and strategies will be suited for almost every major crisis that comes along in my life.

Who should I trust for accurate information? In any situation, I tend to trust the people who have spent their lives working with and studying situations like these. In the case of an illness or pandemic, I trust doctors, medical scientists and virologists, not politicians or talking heads. In a natural disaster, I tend to trust engineers, building contractors and the like. Those people have been working with situations like this or studying situations like this for the entirety of their professional lives, and if anyone knows the situation, it’s them.

As an aside, it is never a bad idea to wash your hands often, minimize touching your face and stay at home when possible if you’re feeling sick as a way to avoid contracting and spreading many kinds of illnesses. Those are things we should all be doing all the time.

Now, let’s talk about finances and frugality.

When the unexpected happens, don’t rock the boat with your finances.

If a major unexpected event in life happens, whether it’s a widespread illness, flood, stock market crash or a personal loss, it’s almost always a mistake to make a major financial move in the heat of the moment. You should not sell your stocks because of what the stock market is doing today or what it has done over the last week or the last month. That’s a giant mistake that usually just locks in your losses.

So, if you have money in stocks right now, my advice is to sit tight. Ride the roller coaster. Pulling out money right now is nothing more than an extremely risky gamble. What about buying investments right now when the price is lower? That’s risky, too, but I view it as a lower risk than selling.

What if you need that money to live on? Many people are already in retirement but still have significant amounts of their retirement savings in the stock market. If that is your situation, then you need to speak to a fee-based financial advisor who can look at your exact situation and give you some guidance.

What if you’re not in any immediate danger, but the stock market is leaving a sick feeling in your stomach? Don’t look at it. Don’t sweat the day-to-day action. You are in the stock market for decades, not days and weeks. The only people that should worry too much about the daily action on the stock market are day traders and people in the financial industry — and I’m not talking to those folks. For everyone else, looking at the daily stock market returns is basically useless.

My investment strategy is simple: if I am not going to need the money for 10 or more years, it’s invested in something aggressive, like stocks or real estate. Because I don’t need the money for that long, the volatility of a day, week or month isn’t a big deal. I have lots of time to recover and have the power of compound interest work for me.

If I’m going to likely need that money within 10 years, it’s in something relatively safe and not volatile. Things like highly rated bonds and money markets are good choices for those time horizons.

What if you need to change things? The best approach is to change your contributions. If you’re getting close to the point where you’ll need the money in ten years, shift your contributions from aggressive investments to safer things. That’s the money you’ll tap in ten years. If you need to, you can start slowly rebalancing by gradually moving money out of riskier things and into safer things, but try to do it with additional contributions at first. In general, don’t rebalance during periods of high volatility. If the stock market has gone up or down more than a few percentage points in a day within the last week or so, wait to rebalance.

If your retirement savings are in a Target Retirement fund, you’re fine. Those types of investments self-balance over time as you approach retirement, so you don’t really have to worry about these things.

What I’m describing here is exactly what Sarah and I are doing with our retirement accounts right now. We’re not touching a thing. In fact, we’re barely looking at the stock market right now. That’s what you should be doing, too. Looking at daily stock market swings adds stress when there doesn’t need to be any.

Smart frugal principles help right now, too.

We’ve all seen pictures and videos and read stories about people stocking up on things like toilet paper. To some, it seems crazy. To others, it’s worrying and a nudge to also stock up.

Here’s how we approach this.

We tend to buy our nonperishable foods and household supplies in bulk and/or when there’s a sale (ideally both), regardless of what’s going on in the world. That means at any given time, we have a month or so worth of food items and household supplies for our ordinary life around our house.

Our bulk buys are only things we know we’re going to use. For example, the household supplies we buy in bulk are things like soap, toothpaste, floss, dishwashing detergent, laundry soap, toilet paper, and so on. If I see a good deal on those things, I buy them because I know we’ll eventually use them. If I see that we’re running even close to low on any of those things, I buy a bulk bundle of them at the lowest price I can find (usually the biggest version of the store brand at a warehouse club, but not always).

We do the same thing with a lot of food items — we buy nonperishable foods that we know we will eat in bulk. We always have lots of dry beans, dry rice, peanut butter, canned tomatoes (and, to a lesser extent, other vegetables, though we usually buy them flash frozen), dry pasta, flour, sugar and yeast (we bake a lot of our own bread products by hand or in a bread machine). When we see a really good sale on one of those items, we buy it. When we notice we’re getting even close to low on something, we’ll stock up on it.

Aside from the cost savings of this strategy (buying in bulk, buying store brands, targeting sales and doing it only with stuff we know we’ll use), if something were to disrupt our ability to buy groceries or household supplies, we’d be fine for at least a while.

What do you do if your cupboards are relatively bare? I basically encourage everyone who isn’t pushed up against the wall financially to gradually move to a bulk buying system like this one, where you buy nonperishable things in bulk that you know you will use before their expiration date. If you have an opportunity to do so now without crushing your finances, do it, but do it in a realistic way. There’s no reason to buy six months’ worth of toilet paper. Buy one large package of it (in store brand form), enough for a month or two, at the best price you can get. Do the same for other nonperishable items that you know you will use up anyway in the next few months.

Another valuable frugal principle to have is to make a lot of things for yourself, particularly food. The more adept you are in the kitchen, the less you have to rely on others to make food for you and the more money you save along the way. This also makes you less reliant on restaurants (and the health of restaurant workers and delivery people).

I don’t claim to be an expert home chef, but I can make a lot of things with complete ease. I did this mostly by making dishes (with variations) that I liked and my family liked over and over, until all of the skills involved became second nature. My family likes spaghetti with sauce, for example, and I’ve made that so many times that I can practically do it blindfolded. Along the way, I got very fast at it, figured out how to make it with lots of variations, and also figured out how to make it delicious, none of which were true early on. I also got very fast at cleanup.

That same thing is true for lots of family favorites, things like homemade pizza, homemade bread, tons of different soups and stews, tons of variations on eggs and omelets, and so on. Simply knowing how to do all of these things well and do them quickly means that I’m naturally more interested in cooking from home, since that’s more convenient and also far less expensive. It has the additional benefit of always being an option (as long as there’s electricity, of course, but then we’re beginning to talk about situations that there’s no real way to prepare for).

Another principle we follow is having a lot of finished meals on hand, stored away in the freezer for easy preparation. If I’m sick or otherwise incapacitated, I’m not going to want to cook. I’m going to want something as easy as possible to get calories in my stomach. We keep some prepackaged meals in the cupboard, but we really lean into preparing meals in advance and keeping them in the freezer.

If we make a big pot of soup, we make it even bigger and fill up some quart-sized containers of soup for the freezer. If we make a casserole, we make four of them and freeze the other three such that they can be pulled from the freezer and popped in the oven.

This not only has the advantage of giving us really convenient food that we made ourselves, but the cost of that meal is usually really cheap because it was made from bulk ingredients. We could buy the 10-pound bag of potatoes at the store, for example, when making a big batch of potato soup. We could buy the jumbo box of lasagna if we’re making four pans of it at once.

What if the unexpected is coming quickly? These strategies help if you have some lead time, of course, but what if you have very little lead time? Getting some prepackaged foods is fine, but just make sure that you’re not buying more than you’ll ever use before they expire.

There are a multitude of other smart moves you can make, both to prepare for the unexpected and to help your financial future at the same time.

Here are some additional specific things you should be doing in your ordinary life that really show their value in unexpected times.

Constantly build new skills and relationships at work. Your goal at your job, beyond doing the tasks assigned to you and collecting a paycheck, should also be to build some strong positive relationships with people there as well as building skills you can use to get a better job someday. That should be part of your motivation every day at work – you do the tasks to make money now, you build skills and relationships to make more money later.

This helps in unexpected times because the more skills you have and the more relationships you have, the easier it will be to find work in an uncertain economy if you find yourself without work.

Yes, sometimes it will be hard to build good relationships in some workplaces. Don’t expect perfection – just remember that the perfect is the enemy of the good. Stick with being positive where you can and aim to lift people up rather than cutting them down, even when they’re not around. Help people out, especially when the effort you have to put out is much smaller than the benefit that the other person gets. (If you can do something in five minutes that will take someone else hours, just do it.)

Most people should not be in immediate danger of losing their job due to current uncertainty, but this is still a great strategy to have for any job you hold.

Have an emergency fund. This isn’t something that most people can produce in a jiffy, but moments of crisis should be a powerful reminder of how useful it is to have an emergency fund. Simply put, an emergency fund is cash stowed away somewhere (usually a savings account) that you can put to use during any kind of emergency. I have a small emergency fund in cash in my home and a larger one in a savings account in a nearby bank.

Obviously, building one very quickly isn’t realistic for many Americans, but it should be a good goal to have, simply because of the protection it offers against the unknown and unexpected. Things like a job loss or a period of illness are much easier to handle with an emergency fund.

My strategy for building one is to set up an automatic transfer from your checking account to your emergency fund savings account, for a small amount each week. Make it $10 or $20. If you do $10 a week, you have $520 set aside after a year. If it’s $20, that’s more than $1,000. Then, never turn it off. Let it keep building, essentially forever. That way, after a while, you never have to worry about it being there.

What if you don’t have an emergency fund and are facing a crisis that requires cash? Unfortunately, in those situations, debt is usually the answer. If you have to put some expenses on a credit card or a personal loan to get through a very bad situation, that’s an unfortunate situation. However, you should aim to get that debt eliminated as soon as you can and, even more important, keep that experience in mind as you aim to build an emergency fund.

Eliminate expenses that aren’t memorable. My rule of thumb when it comes to expenses that aren’t strictly needs is that if they’re not memorable, then they shouldn’t recur. If I look at my bank statement and see a bunch of stops at the coffee shop and they all blur together and aren’t memorable, then I know I need to cut back seriously on those stops. If I see a meal eaten out and I can’t even really remember it, then I know I should eat out less often and save such events for special occasions. If I see an entertainment expense or a hobby expense and I have to struggle to recall anything about it, a real change is needed.

Again, the reason this prepares you for the unexpected is that it frees up some of your spending to put yourself in a more financially stable position so that you can survive getting sick, you can survive a job loss, you can survive whatever life throws at you. You are much more likely to survive the unexpected if you cut out the unmemorable expenses in your life and apply that saved money to building an emergency fund or getting rid of debt.

There’s nothing wrong with using money to do something you enjoy in a genuinely memorable and impactful way, but when you’re spending money on stuff that just fades away pretty quickly, there are better things to be doing with it.

You can start doing this immediately and it will have an impact very quickly. Look over your expenses for the last month. Which ones from two or three or four weeks ago do you barely remember or not remember at all? You should really cut down on those particular expenses going forward because they have no real positive impact on your life. They’re just dollars vanishing from your pocket, dollars that can do a ton of good when they’re used in other ways.

Minimize your recurring expenses. Take a look at every single weekly, monthly, quarterly, and annual bill you have and ask yourself whether it’s actually necessary. If it’s not, is it providing you any real value for the money you spent? If you’re not getting enough value, cancel it. If it’s a necessary bill, is there anything you can do to make that bill smaller? Call up the company that’s issuing that bill and see what you can do to trim it down or consolidate it.

The smaller you can make your recurring expenses, the easier it is to make ends meet on your current pay and the easier it is to survive if you have to take a lesser-paying position unexpectedly.

Unexpected events, big and small, are a part of life. While you can’t predict exactly what they are, you can expect that they will happen.

When times are good, you have an opportunity to get ready for the times when things aren’t quite so good. This way, when things take a tumble, you’re not caught in a panic with life changes that you can’t easily handle.

My thoughts, hopes, and prayers are with everyone working to combat the coronavirus outbreak. The best thing I can do to help is to be prepared myself, take simple steps to keep myself and others safe, and share sensible advice. That’s all most of us can do in most unexpected situations.