When income decreases but the bills don'tPosted: Updated:
As unemployment rates continue to grow in the wake of a weakened economy, consumers nationwide are now finding it increasingly challenging to cover essential day-to-day expenses, prompting many to rely on credit to pay for necessities.
According to a recent study conducted by Money Management International (MMI), almost 90 percent of respondents said their family is feeling the effects of an economic downturn. If your family is feeling pinched, it is time to take a hard look at your family's budget and begin building a stronger financial foundation.
Consider the following steps from MMI to help your family adjust to today's higher cost of living.
Assess your financial situation. One key to success with any financial plan is to be realistic. Start by figuring out where you stand today. Try to realistically determine how long your income will be reduced and the impact it will have on your daily life.
Analyze available resources. Now that you have a clear understanding of your current financial obligations, it is time to analyze your available resources. From where can you get additional income?
Set priorities. If the results of your financial review indicate that you cannot realistically meet all of your obligations, you may have to set some priorities. Essentials like mortgage or rental payments, water and electricity bills and grocery shopping should come before entertainment and luxury expenses.
Create a plan. Changed financial circumstances call for an altered financial plan. Considering your assets, income and your priority obligations, then create a plan that is realistic and flexible. Be sure that saving is a part of your plan.
Contact your creditors. Once you have a plan, communicate with each of your creditors explaining your situation and how you plan to repay your debt. Many creditors are willing to work with you when you're honest about a temporary financial strain.
As the cost of living and the unemployment rate continue to rise, preparing for the unexpected can keep a temporary financial setback from becoming a long-term financial crisis.