Standard Operating Procedure (SOP) for your Finances

by Sahirenys Pierce

In this blog, we’re going to talk about how to create a standard operating procedure, SOP, for your finances. So regardless of what ups and downs life may throw at you, whether it’s a recession or a family emergency. You feel confident that you have thought threw the best case and worse case scenarios. To the point that you have a game plan A, B, and C ready in place because of your SOP. This strategy allows you to play some defense to strategically protect yourself and your wellbeing during any financial downturn. This way we can realistically hope for the best and prepare for the worst in a more holistic nature.

What is an SOP?

A standard operating procedure for your finances is your strategic go-to financial game plan on what to do if you get hit with hard financial times. We do this by breaking down your money mindset, your financial situation, and what financial options you have available. So that we can create real solutions that you can implement in order to get through difficult times. 

SOP strategies are not new, we see them in all industries and areas of our life. For a lot of us, their such a standard that a lot of us might not even realize it. Top corporations, our military, schools, and even airline companies have SOPs set in place. They do this in order to protect, provide stability, and help us avoid making irrational decisions during hectic times. This is one of the core reasons why having an SOP for your household and finances is so important.

Step #1: Open Communication

The first area of an SOP that you want to focus on is opening up with yourself. As economic times change, it’s important to check in with yourself and how you’re doing. A lot of us have past financial fears that can pop back up and change how we react to situations. It’s vital to be aware of this so that you work on avoiding making irrational decisions during these times. You want to also check in with your significant other and your family. To make sure they’re ok and that you not holding need to know information from your partner or loved ones. Your community is one of the biggest support systems to have when going through any difficult time. Don’t push them away!

Step #2: Where is Your Money At?

The next step in creating a standard operating procedure for your finances is to see where your money is at. You can do this by looking at these three areas: your income, saving, and assets. When it comes to your income, you want to look at your take-home pay, benefits, and retirement contributions. When money is tight, consider making adjustments to your paycheck or look for ways to increase your income. This is the same process you want to do when looking at your savings and assets. Do you need to modify your goals, your timeframes, or pause those goals while times are tough?

Step #3: Where is Your Money Going?

Afterward, you want to see where your money is going by doing a budget. You do not need a picture-perfect budget. You just need a chicken scratch outline of your projected expenses and a place to track your expenses. I personally use google sheets to easily calculate my weekly expenses, but you can also use apps to track them. I am a big fan of the Mint app that pulls your transactions into one place for easy tracking. 

A small tip here is to utilize the first step of the High-5 Banking Method. Which is separating your bills and your lifestyle expenses to be clear on your needs vs your wants.

Step #4: Utilize your Emergency Fund

The next step in creating an SOP for your finances is to have emergency fund savings. You need to be very clear on how much you need, and use your emergency fund when needed. So if you get laid off, get hospitalized, or have a large family emergency you rely on these savings. This is why I recommend considering your risk tolerance, your dependents, and the flexibility you’ll need in a worst-case scenario. This could be an opportunity to boost your savings or where you bank to maximize your emergency funds potential.

Step #5: Implement a Cut, Keep, & Reduce Strategy

The last step is to get into a Cut, Keep, and Reduce mindset when attacking the worst-case scenario. The goal here is to stretch your emergency fund and assets as far as you can to survive the storm. 

We do this by reviewing every single line item in our budget and figuring out:

  • how we can keep these expenses, 
  • how we can reduce these expenses, and 
  • what happens if we have to cut these expenses. 

Every line item in your budget has a different approach and financial options. You need to understand your bills and figure out what financial options you can use if times get worst. By doing this Cut, Keep and Reduce strategy you are creating a game plan A, B, and C for your finances. So if tough times come, you already know what financial options you have available.

Drop Your Ego & Educate Yourself

While creating your SOP, I recommend that you educate yourself on the service that can help you during these times. I know it can be a big hit to your ego. But don’t let your ego crush you from getting the help that’s available to you. We live in a country that takes a percentage of your income to provide you with government assistance if needed. Again, you’ve already paid for these services so use them if you need them without shame. But once you get back on your feet, I recommend quickly transitioning off them. I know it can get a little comfortable or complicated once in the system.

Here are some of the top government and company programs I recommend applying for and doing more research on:

  • Food Stamps and WIC
  • Unemployment benefits
  • State Healthcare Program or Obama Care
  • Utility Discount Program

Closing Thoughts

The most important part of a Standard Operating Procedure for your finances is understanding and implement all 5 steps. Therefore you know each step you need to make inorder to evaluate your financial situation and make adjustments as necessary. So regardless if you are touched by a recession, job loss, health situation, or a family emergency, you know you what tools you have.

By implementing your 5 Step SOP: 

  1. Open up all lines of communication with yourself and your circle of trust,
  2. See where your money is at,
  3. See where your money is going,
  4. Review your emergency fund savings
  5. Implement your Cut, Keep, & Reduce Strategy

This process is how you through every possible solution to any financial problem you may have. By digging deeper into the best and worse case scenarios, you can be financially prepared for whatever comes your way.

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