Whether you’re by the water cooler, at happy hour, or in the waiting room at the dentist’s, it’s hard to avoid conversation about the progressively worsening economic climate. Food prices are up six percent, but the average pay raise in 2008 was less than four percent. Experts anticipate a financial picture that continues to worsen, while widespread budget cuts have media pros wondering if their jobs are in jeopardy.
While other industries have yet to suffer a job hemorrhage like that of the financial sector, the media business has already been dealt numerous blows — the Los Angeles Times and media giant Time Inc. are cutting staff, and after 100 years The Christian Science Monitor has moved the majority of its output to online. Never mind the rash of recent magazine closures and cuts to staff.
“I’m worried about the immediate future,” says Los Angeles-based publicist Carmen Letscher. Many of the small businesses with which she works view public relations as a luxury and won’t hesitate to cut those services if their profits slip. “If things don’t start looking up, I may be out of a job,” Letscher says. “I’m certainly not cushioned for the potential impact, and I’m concerned about that.”
“Money is like dieting. You’re shocked at how much you’re eating when you start to keep a food diary, but it’s not that hard to cut back once you’re aware.”
Once you know where your money is going, changes are easier to make due to the light being shined on how you’re spending. The goal is simple, says Dayana Yochim, senior writer for The Motley Fool: “Spend less money than you make.”
Since many media pros are wondering how to insulate themselves against further industry contraction, mediabistro.com spoke with personal finance experts. They told us which adjustments are worth making now, even if the financial downturn has yet to affect your bottom line, to prevail in a financially challenging media future.
Set a budget
Even if you’re enjoying job security, rising prices may be driving up your monthly expenses. No one likes the “b” word, but setting spending limits is the first step to securing your financial future. “Money is like dieting,” says Money senior writer Donna Rosato. “You’re shocked at how much you’re eating when you start to keep a food diary, but it’s not that hard to cut back once you are aware of it.”
To track spending, you can use online tools such as Mint.com or QuickenOnline.com. According to Yochim, these sites aren’t just safe, but they do much of the work for you. “They hook up with your [bank] accounts,” Yochim says. “Every time you go online, they grab your information and populate basic budget categories and track your spending. It goes back 90 days, so immediately you have a three-month snapshot of your spending.”
The main way we overspend and get ourselves into debt is through the use (and abuse) of credit cards. “If you don’t put purchases on a credit card, it’s impossible to spend more than you earn,” says Rosato.
To keep more money in your pocket, our experts suggest leaving your credit cards at home. “This is the No.1 way to instantly curb that everyday mindless spending,” says Yochim. “Studies show [that] when we use credit cards, our mind doesn’t register them as actual currency. We don’t feel the immediate loss of spending when we hand over a credit card.”
The second part of the equation is to pay off credit card balances as they arise. “Look at the landscape and prioritize,” says Rosato. “Where is your debt? Look at which debt has the highest interest rate and start paying that down. Ideally, you want to pay all [of your credit cards] off.” Since the average interest rate on credit cards is anywhere from 12 to 18 percent, when you carry credit debt you actually end up losing even more money than you’ve spent by the time your monthly bill gets tallied. If you don’t have the money to pay the balance each month in full, Rosato advises paying as much above the minimum as you can afford.
An advertising sales rep at a regional magazine in upstate New York, Eva Tenuto is working hard to pay off her credit cards in case the media industry contraction begins to take hold at her workplace. Though she has yet to feel the impact of the economic downturn, she’s expecting that she soon will. “My work is based on commissions,” says Tenuto. “I’m getting paid for last month now, but my sales are decreasing, so in a few months I think my checks are going to look different.” She has also been preparing for winter — and possibly bleaker financial times, with it — by filling up her home’s heating oil early and stocking up on necessities. “I’m paying for things ahead of time in preparation for the months ahead.”
Scrape together an emergency fund
If you lose your media job or a lucrative freelance contract, you’ll need savings to get you through lean times. “We normally recommend having three to six months of living expenses set aside,” says Rosato. “Today, it’s taking five months to find [a new job], on average, so, you want to have at least six months’ [expenses saved] to cover your bills.” Even if you put away $50 a paycheck, Rosato says it adds up. When figuring out how to save, seek accounts that will offer some return on the money you put away. “I see a silver lining in the financial crisis: Banks really need your deposits,” says Rosato. “You can find savings accounts paying three or four percent interest.”
“Pay yourself first,” Yochim says, advising that savings get deducted from each paycheck as soon as it reaches you. You can automate the process by allocating some of your direct deposit to a savings account or by setting up a recurring transfer with your bank. Aileen McKenna, a senior account manager for direct marketing company JCG Group, Ltd, says she got on the ball before the bottom fell out on Wall Street. “The shift in the economy hasn’t so much forced me to make major changes to my lifestyle as it has forced me to be ruthless about my previous commitment to financial sanity and security,” she says. Saving is a high priority for McKenna, who says, “I have all kinds of direct debits set up for different savings accounts, each dedicated to a different savings goal, like gift giving, vacations, or my emergency fund, so that I never have a chance to waste that money.”
Scale back, rather than sacrifice
At the end of the day, most media pros don’t want to lead an austere existence. Yochim points out that even while saving money and paying off your debt, you can still enjoy the fruits of your labor. “The real question is: Are you going to be miserable if you can’t have your Starbucks every day?” There are ways to cut spending without cutting quality of life, she says, suggesting meeting friends for coffee and dessert rather than going out to dinner every time.
Can’t decide what is and isn’t a source of joy? Think about the past six months and write down the three things that you didn’t mind spending your money on and three things that felt like a waste of money. “There you have it,” says Yochim, “your list of things to cut back on.”
Take a few months to pay off debt and beef up your emergency fund so you are more secure if the media industry downturn worsens. No matter how much debt you have right now and how much money you spent last week, “All is not lost,” according to Yochim, who points out it’s never too soon to start making wiser choices with your money. “Make your habits better and lessen the blow.”
Money in your pocket: Practical ways for media pros to protect their wallets
1. Bring your lunch: If you brownbag it two days a week, you can save you up to $20 a week, which adds up to more than $1,000 a year.
2. Un-join the gym: If you are paying for a monthly gym membership that you rarely use, cancel it and direct that money straight to savings, instead. Same goes for Netflix subscription and premium cable channels you seldom watch.
3. Set up an FSA: With a flexible spending arrangement (FSA) for healthcare, you can contribute pre-tax dollars from your paycheck to reimburse yourself for medications, co-pays, and procedures not covered by your insurance plan. If you spend on daily medications, including many over-the-counter drugs, you can get that money back – from yourself. Check IRS.gov for more information.
4. Reevaluate your insurance: You can often combine renters’ or homeowner insurance with car insurance to save even more money. If you drive, raise your car insurance deductible, going from a $250 or $500 up to $1,000 deductible. Paying out of pocket for damages is better for your long-range rates because insurers look at your claims history.
5. Stop overpaying on taxes: If you received a tax refund last year, chances are you’re having too much withheld from your paycheck each period. Adjust your withholding just enough so you don’t owe the IRS at the end of the year, and you’ll see more money in your paycheck without suffering a loss.
Originally published on MediaBistro.com