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Dealing with a Drop in Income. Bev Doll Family Living Agent UW-Extension May 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

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Dealing with a drop in income l.jpg

Dealing with a Drop in Income

Bev Doll

Family Living Agent

UW-Extension

May 15, 2009


When your income drops l.jpg
When your income drops…

  • Job Layoff

  • Illness

  • Death

  • Divorce


Natural reactions l.jpg
Natural Reactions…

  • Shock

  • Panic

  • Stress

  • Denial

  • Burden

  • Fear


5 steps to financial independence l.jpg
5 Steps To Financial Independence

  • Set Goals

  • Analyze Information

  • Create a Plan

  • Implement the Plan

  • Monitor and Modify the Plan


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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 l.jpg
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 l.jpg
Where Are You Now?

  • Where Do You Currently Stand Financially?

    • Income Coming In

    • Expenses Going Out

    • Who Do You Owe?


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Track Your Expenses-Why?

  • To get an accurate picture of where your money is going

  • Allows you to make educated spending choices


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Track Your Expenses-How?

  • Notebook method

  • Receipt method

  • Checkbook register

  • Pre-printed tracking form


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

The little,

everyday

expenses

can make a

big difference!


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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


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How Are You Going To Get There?

  • Decrease Expenses

    • Compare needs to wants

    • Find your spending leaks


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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.


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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


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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?


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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


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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


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

Don’t

  • 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.


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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


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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


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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


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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 l.jpg

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

Tips Negotiating with Creditors


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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 l.jpg
Good Luck On Your Financial Journey!

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

    but NO plans.


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