Between rising unemployment rates and high prices, many people are leaning more on credit cards to get by than last year. When you're battling competing priorities, it can feel impossible to figure out what to do next with your money, especially with advice coming from everywhere: influencers, experts and even the news.
I turned to Bola Sokunbi, a certified financial education instructor, CEO of Clever Girl Finance and CNET Money expert for advice. Since everyone's financial goals are different, Sokunbi told me, your next best money move boils down to what you can manage, and that will look a little different for everyone. Here's what she says you can do to feel more confident in the financial decisions you're making.
1. Start with what's within your control
It's common to see the news and think that because the economy is slowing, every financial product is going to plummet, and you should cut your losses, said Sokunbi. This type of mass panic can be dangerous for your finances.
To control your finances, Sokunbi recommends a common tactic: sticking to a budget.
It might not sound glamorous, but knowing what's going into and out of your bank account each month is one of the best ways to stay in control of your money.
Sticking to a budget is also an opportunity to look at your expenses and see where you can cut back on some areas, such as subscriptions, to avoid living paycheck to paycheck. Sokunbi recommends the zero-based budgeting method, where every dollar in your account goes toward an expense, debt payment or savings goal.
A budgeting app can help you look at your spending and expenses. CNET banking editor Kelly Ernst recommends Rocket Money for its bill negotiation and automated savings features.
2. Break bigger goals into smaller ones
Just because the Fed's expected to cut rates this month doesn't mean your financial situation will change overnight. Sokunbi recommends taking it one step at a time by breaking debt payments and savings goals into smaller, more manageable chunks.
For example, let's say you have $10,000 in credit card debt and two years to pay it back on a 0% balance transfer credit card. Here's how Sokunbi recommends breaking this down:
- Divide the amount into monthly payments. Instead of focusing on the larger amount, focus on how much you must contribute every paycheck. To pay off your $10,000 debt in two years, you'd need to pay $417 a month or a little over $100 a week. That number can feel easier to digest than $10,000.
- Throw windfalls at your debt. If you receive a work bonus or tax refund, consider putting a large chunk of it towards your debt to pay it down faster.
- Set smaller milestones for yourself. Instead of focusing on your timeline for the full $10,000, celebrate each $1,000 you pay off. Maybe you can even tie this milestone to a small reward like a latte from your favorite coffee shop.
Visual trackers and tools, such as a worksheet, app or money coloring book can help you stay motivated and aligned, Sokunbi added.
3. Build a safety net
You probably know the importance of building an emergency fund, but it's easy to stall when you're juggling other priorities. It's important to grow your savings to prepare for any downturn, such as a job loss, unexpected medical bill or car repair. If you struggle with financial anxiety, Sokunbi says an emergency savings account can help lower your stress.
“This is essentially creating a kind of external peace of mind because it's money you have in the bank that you can tap into if life happens,” she said.
Many experts recommend saving three to six months of expenses for your emergency fund, but that goal may feel overwhelming. Start by setting up automatic transfers to a savings account each time you get paid. Then, use our goal-setting tip to break your goal number into smaller milestones. For instance, maybe you set a goal of saving your first $500. Then $1,000. Slowly inch closer to building a bigger emergency fund.
If you already have emergency savings, revisit your goal to see if you need to add more to it.
4. Don't wait to start saving for retirement
Even if you're unable to do more than cover your bills at the moment, Sokunbi said even small steps can get you closer to your long-term savings and retirement goals. She suggests revisiting your budget to see if there's any wiggle room to start saving a little bit each month. In the meantime, start small by learning about different retirement account options, so you're ready to go when more space frees up in your budget.
If you're already contributing to a 401(k) or IRA, Sokunbi says you shouldn't be scared into dialing back your contributions based on stock market dips. Fluctuations are a regular part of the stock market. As long as you're investing for long-term goals (anything that's five or more years in the future), you don't have to stress every time Wall Street shrieks that the sky is falling.
"Be mindful about thinking of the long term, because economic downturns are always short-term," said Sokunbi. "Shifts in job markets and economic situations are normal so don't get caught up in the short-term frenzy that you start making poor long-term decisions."
5. Still worried? Diversify your income
With layoffs rising in the news, you might be worried about having a Plan B if you lose your job. In addition to your emergency fund, having an additional stream of income could help. During times of economic difficulty, people often find creative ways to make money to stay afloat, Sokunbi said.
If you need to boost your income, look for ways to make money that don't feel too overwhelming. For example, CNET staff writer Liliana Hall loves dogs and turned that passion into a side hustle that earns her $4,000 a year doing something that doesn't feel like a job. Sokunbi also suggests downsizing and selling stuff you no longer need.
6. Don't be afraid to ask for help
It's normal to experience financial anxiety, especially since the state of the economy isn't in your control. If you need help managing your budget, figuring out how to cover your debt or prioritizing your credit card payments, talk to a reputable financial counselor.
Look for non-profit credit counseling agencies with low or no fees to avoid paying for services you don't really need. If you bank at a credit union or if you're in college, you may have access to free credit counseling services. You can find a list of approved credit counseling agencies on the Justice Department's website.
Sokunbi says that partnering with a financial counselor can help you gain confidence in your money management skills, so you're better prepared to tackle problems in the future. She also recommends continuing to boost your financial literacy using free resources, like your local library, government websites (like Investor.gov) and social media. YouTube and social media are great platforms to make learning enjoyable but avoid misinformation by making sure the creator is experienced and has solid financial credentials.
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