Dealing with a Drop in Income

Bev Doll Family Living AgentUW-ExtensionMay 15, 2009

When your income drops…

Job Layoff Illness Death Divorce

Natural Reactions…

Shock Panic Stress Denial Burden Fear

5 Steps To Financial Independence

Set Goals Analyze Information Create a Plan Implement the Plan Monitor and Modify the Plan

Financial Roadmap

Where Do You Want To Go?

Where Are You Now?

How Are You Going To Get There?

Where Do You Want To Go?

Setting Goals Specific Measurable Attainable Realistic Time bound

Goals in writing are dreams with deadlines. – Brian Tracy

Where Are You Now?

Where Do You Currently Stand Financially?

Income Coming In Expenses Going Out Who Do You Owe?

Track Your Expenses-Why?

To get an accurate picture of where your money is going

Allows you to make educated spending choices

Track Your Expenses-How?

Notebook method

Receipt method

Checkbook register

Pre-printed tracking form

“Small leaks can sink big ships.”-- Ben Franklin

The little, everyday expensescan make a big

difference!

How Are You Going To Get There? Compare what’s coming in

to what’s going out…If expenses are exceeding income, look for alternatives:

Increase income Part-time job Adjust with-holding on

paycheck

How Are You Going To Get There?

Decrease Expenses

Compare needs to wants

Find your spending leaks

Starting The Journey

Don’t think of your spending plan as a chore or something you have to give up….Think of it as a means to an end.

If you take a wrong turn, get back on track as soon as you can.

Communicating About Money Many families face money problems

due to lack of communication: Financial stresses Value conflicts Emotional uses of money Unrealistic goals Lack of planning

Communicating Tips

Define the problem Write down all possible solutions Evaluate solutions Select one solution Identify things that might stand in the

way of your success What are you willing to sacrifice to

solve this problem?

Money Meetings

One hour or less, once a month Schedule at a realistic time Hold in pleasant surroundings Have all the necessary tools available Have your task list ready

Pay bills Plan and review spending plan and goals Balance checkbook Make needed phone calls Draft letter to creditors

What If You Can’t Pay The Bills?

Don’t panic! Size up your current situation

How much income can you count on?

List your expenses Look at consequences of not paying

each one Prioritize

Pay basic necessities first

What If You Can’t Pay Your Bills cont..

Look for options Can you sell something? Can you downsize your housing? Does your decrease in income qualify you for

assistance such as Food Share, Badger Care, etc?

No matter how bad your situation is, don’t ignore your bills.

Explain your situation to your creditors.

Don’t

Where do you start?

Take action right away…reduce your chances of being harassed by working out solutions early.

Contact Creditors BEFORE you miss a payment

Prioritize Bills Don’t Take on New Debt Don’t Ignore Bills

What can happen when you don’t pay bills?

Utilities shut off Interest Late Fees Turned over to

collection agency Foreclosure Repossession Wages Garnished Legal Action

Which Debts Do I Pay First? General rules on setting

priorities: First, pay housing-related bills Pay basic living expenses next Pay the minimum required to

keep essential utility service Pay car loans or leases next… if

you need to keep your car

High, Medium, & Low Priority? Make tax debts a high priority Make student loans a medium priority Make loans without collateral a low priority Treat cosigned debts like any others Don’t move up a debt’s priority based on

threats Do move up court judgments in priority if

the creditor has already sued Be cautious about consolidating debts or refinancing your home

Tips Negotiating with Creditors More likely to work with you if:

been a good customer contact them before they contact you

Options you could request from your creditor: Reduce monthly payment Reduce or drop fees for late payments Lower interest rate Pay interest only on the loan until you can resume

making monthly payments Request permission to sell the item

Getting Your Report

Free Report available www.annualcreditreport.com 1-877-322-8228

You can also contact the credit bureaus directly TransUnion Experian Equifax

Good Luck On Your Financial Journey!

Unless commitment is made, there are only promises and hopes . . .

but NO plans.