Surviving a financial setbackPosted: Updated:
No matter how well we plan, financial setbacks can arise when we least expect them. If an illness, injury or job loss causes you to face a financial crisis, do not assume that things will improve quickly and put all of your expenses on credit cards.
Living as though nothing has changed is the number one mistake people make during challenging times and can lead to a hefty amount of debt in a few short months. Instead, create a realistic plan to get you through the hard times and determine a reasonable amount to pay to your creditors each month.
Once you have a plan, mail a letter to each of your creditors explaining your situation and how you plan to repay your debt. Tell them that you are temporarily unable, not unwilling, to repay. Remember that it is always best to proactively reach out to your creditors before they have to contact you for collections.
Next, sit down with your family and discuss ways to cut costs -- even the smallest things add up. It is important that everyone in your household understands the situation and the goals you're working toward in order to be successful. Here are six quick cost-cutting measures offered by the experts at Money Management International, to help you weather a financial storm.
Change your routine. Dining in and avoiding convenient foods can save you a lot of money very quickly. For example, if you order lunch three days a week, brown bagging instead could save you $1,000 or more each year.
Be a smart shopper. Always shop with a list and take cash so that you can't overspend. Use coupons only if you planned to purchase the item anyway. Buying in bulk can save you money if you are sure you'll use the item in quantity.
Kick a habit. Save some money and accomplish one of your life goals at the same time. For example, if you smoke one pack of cigarettes each day, quitting could save you more than $100 a month.
Pay your bills on time. Late fees and over-the-limit charges can quickly add up to a debt problem. In addition, many creditors are raising rates and even closing accounts as penalties for late payments.
Evaluate insurance needs. Research your health insurance premiums and co-payments. Explore the difference in cost between the doctors that are in and out of the network on your insurance plan. .Also, consider paying some insurance premiums annually or semi-annually; the cost is usually cheaper than paying monthly.
In addition to your personal efforts, don't be shy about seeking the help you need. Contact local offices in your city that can give information about unemployment pay, food vouchers and utility discount programs. You can also seek assistance from your local church or United Way.