Insider Jeff Fleming

Save for a Rainy Day!

All too often, we don't plan for a rainy day. When we end up in debt, we don't know how to get out. Jeff's advice: Plan carefully and diligently to get back in the black, then build up a reserve in case you fall on hard times again.

Dear Jeff:
About five years ago I was downsized from a corporate writing job. I went out on my own as a corporate writer. Today, not only did I lose my life savings, I am $45,000 in debt to the IRS. I just declared bankruptcy with great reluctance. I am now working a "survival" job for $33,000 a year. In New York City, that just about pays my rent and my monthly IRS installment plan and a few other bills. Fortunately, I am single and have no dependents. Is there anything I can do to help myself out of this hole and plan more wisely for the future?

Jeff Says:
Your question is difficult to answer. I truly wish that there was a financial wand that I could wave and help you start again. However, your difficulties came as a result of the loss of your job, not from careless spending or overuse of credit cards as a means to improve your current lifestyle. The downsizing of an employer is usually not foreseeable, nor is it something most people plan for financially. But your situation is a perfect example of why I stress that people have emergency funds from which they can withdraw money in hard times.

My first recommendation to people in your situation is to manage your cash flow VERY CAREFULLY! Keep an accounting of every penny that you spend and make sure that none of your hard-earned dollars are slipping through the cracks on items that may not be necessary. For instance, buying a cup of coffee for $1.50 three days a week during the course of one year totals well over $200. It is always the little things that add up.

For a great Web site focusing on saving money, visit Stretcher.com and subscribe to its free newsletter.

As for the cost of living in New York, have you considered moving elsewhere? After all, you either need to increase your income or decrease your expenses. This decision is one that only you can make. In the meantime, pay yourself first! Take the first $25 from each of your paychecks and save it somewhere. This savings will increase faster than you might expect. If you wait to get all of your bills paid first, there won't be anything left over for you. Start saving now for the next rainy day.

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