“Only when the tide goes out do you know who’s been swimming naked.” This saying is attributed to Warren Buffet. When the economy is bad or when your life seems to be turned upside down, you get to see how strong your financial foundation is. Are you swimming with a swimsuit or are you skinny dipping?
If your financial foundation was built on debt, living above your means, and not saving, when bad economic times hit and you lose your job, your foundation won’t be able to support you very long. It really isn’t a foundation at all.
If your foundation was built on good financial habits like budgeting, having no debt, living way below your means, and saving an emergency fund, you can weather a bad economic downturn because your financial foundation is strong.
Being Able to Survive the COVID-19 Shutdown
If you build your life or your business relying on debt, for the most part, you can keep it going as long as you have the money coming in. Once that income runs out, your foundation will be exposed. How long can your business stay afloat with no emergency fund in place? How long can you keep making your debt payments when you lose your job?
Don’t think this stimulus money is going to fix your life if you have a bad financial foundation. It might put a band-aid on your problems for a month, but it’s not going to fix your finances. It doesn’t matter if you make $20,000 or $80,000 and live above your means. Another $1,200 isn’t going to fix your situation. It doesn’t matter if you have your job or lost your job.
What are you planning to do with the stimulus money? Are you going to use it to pay your mortgage, credit card payment, and electricity? Or, are you going to delay those payments if your creditors allow and use it to buy random things?
Surviving the Next Pandemic, Recession, or Job Loss
Will there be another pandemic in your lifetime? Your guess is as good as mine. Will there be another recession or job loss in your lifetime? Yes! Most definitely there will be. Will you be ready the next time it happens? When your behavior with money causes you to keep living paycheck to paycheck, you won’t be ready. Stop swimming naked and get ready for when the next tide goes out again.
You need to have a solid financial foundation. You can live your life with debt, but eventually, it will fall apart. Debt only works if everything keeps working. You can borrow and borrow as long as you can pay it back. When you lose your job, the car payment you have suddenly isn’t affordable. The credit card debt suddenly isn’t manageable. Neither of them was ever affordable! You were living above your means.
A good financial foundation consists of being debt free and having a 3-6 months emergency fund in place. Take care of your four walls (food, shelter, transportation, and clothing) right now, and then start building your life on a good financial foundation.