Are you concerned about your income dropping in this challenging environment? Whether it is already happening or may be in the near future, now is the time to review your spending and resources and make changes as soon as possible. If you continue spending at the same rate, with less income, you may find yourself depleting your savings or going deep into debt.
It helps to remember that, for the most part, the financial changes you may need to make during this time are only temporary.
- File for Unemployment Benefits if you have lost your job or your hours have been significantly reduced. Filing online or by phone is your best bet https://labor.mo.gov/unemployed-workers
- Make a Plan for Spending: Set priorities on expenses, decide where spending cuts can be made and defer non-essential spending. If your income is still coming in as usual for the time being, maximize your emergency savings. Hold onto any cash and make only minimum payments until you know what your situation will look like.
- Talk to your family and determine priorities. You will need to make some hard choices. This may mean that everyone in the household has to give a little – including children. Talk to your family and include them in discussions about lifestyle changes that may be needed. Remind everyone this situation is temporary. Communication around money is always important, but especially in challenging times.
- Start tracking your spending sooner rather than later – You can track your daily/weekly spending using free phone apps, the notes app on your phone, or paper and pencil. Finalize your expense picture by pulling together your monthly expenses like rent/mortgage, auto expenses, utilities, and other items. Don’t forget expenses like insurance, taxes, yearly memberships and fees that don’t happen every month.
- Compare your income and expenses. Make reductions in spending as quickly as possible. Don’t forget to look at monthly automatic withdrawals or charges that you may be able to stop or put on hold if they are not necessities. Consider putting together a list of your assets and liabilities so you have a big picture of what you owe and to whom, but also what you own that is available to you financially should you need to make tough decisions about finding cash (i.e. bank accounts, equity in a house or car).
- Reduce expenses: Evaluate your expenses and consider ways to do things differently (be creative). For each area ask yourself – can I do it myself, or less expensively, less often, or can I avoid doing it at all– at least temporarily? Ask to lower interest rates on debt, cook at home, use parks and free entertainment, use the libraries (electronic resources) for books, videos, music, etc., evaluate the need for extra services, reduce what is spent on gifts, barter, make things yourself, recycle or reuse what you have, find a new use for old items around your house, go longer between haircuts, etc.
- Review resources: yours and community resources: Consider how you can spend time rather than money – doing things for yourself that you might have previously paid someone else to do for you. What skills or knowledge can family members provide to help you reduce spending (i.e. pitching in to do tasks or services you need)? What non-money resources do you have on hand that can be used to meet household needs? Are there community resources you can access through local institutions such as the United Way http://211helps.org., local churches/temples and non-profits.
- Find extra income: Get creative about things you could do to generate income (legally of course). Is there a skill or hobby you could use to earn income? Do you have a skill you can barter with to get family needs met? Do you have old or extra items around the house that you can sell to raise extra money? See University of Illinois Extension website for bartering or income generating ideas. https://web.extension.illinois.edu/toughtimes/bartering.cfm
- Set Priorities for Debts. Make a list of all outstanding debts and determine what needs to be paid first if you don’t have enough to cover everything. In general, first priorities should be your mortgage or rent, utilities, car payments, health insurance, child support and court required maintenance.
- Contact Creditors: Reach out to credit card companies, utilities, lenders, and student loan companies before missing a payment. Ask about payment arrangements, deferments, or other options to minimize current obligations without hurting your credit.
- Stop credit purchases unless it is for emergencies.
- Beware of cashing out of retirement plans or life insurance except as a last resort.
A delay in making difficult decisions may result in greater financial setbacks and a longer timeline required to recover. If you are feeling overwhelmed, consider breaking your efforts down into bite-sized tasks you can accomplish at various points in your day – so you can see forward movement with each small step you take.
For more in-depth information and detail about surviving an income drop as well as worksheets to help with financial decisions, visit University of Illinois Extension’s “Getting Through Tough Times” series https://web.extension.illinois.edu/toughtimes/.