No amount of money or planning can guarantee that your family will not go through a disaster at some point. Disaster comes in many forms and can vary in the severity of its effect on your family. Disaster can strike at any time. Unfortunately, disaster has not only traumatic emotional consequences but often negative financial consequences as well.
Natural disaster, such as the current drought in Alabama, sudden military deployments, layoffs, family changes, medical emergencies and divorce can all lead to a drop in income. You may begin feeling a large amount of stress because of your situation. However, with some planning, you can take control of your finances.
Sharlean Briggs, an Alabama Extension regional agent in Family Resource Management & Workforce Development offers the following steps to help farmers and others whose income and livelihood have been affected by drought:
1. Try not to panic! Though your natural tendency when your income drops may be to worry and wonder how you’ll make it, try to remain calm. There are resources that can help you through this difficult time. If you feel a great amount of stress, you will not be able to think as clearly and you may make decisions that you will later regret. Try to keep a routine schedule in your life for consistency. Attempt to eat well and get enough sleep.
2. Take stock of what you have and what you owe. Begin by taking an inventory of all the resources you have. Get out bank statements, investment papers, retirement funds, and insurance information. Consider all of your resources such as cars, your house and various pieces of equipment you might own. Examine how much debt you have as well. Look at any loans you might have along with credit cards. Determine what regular monthly bills you have and if you will have any irregular amounts due within the next few months.
3. Make a plan and stick to it. After you have inventoried your situation, it is now time to make a plan for how you will adjust your spending and pay your bills. Prioritize bills. At the top of the list, should be bills that do the following:
- Maintain shelter (rent or mortgage)
- Maintain vital services (utility, phone, transportation insurance)
- Cost the most to postpone (bills with late penalties, repossession or disconnect/reconnect charges)
- May be vigorously collected
Take a look at how much income you will have and make a plan to apply that income to your bills. If you find you cannot cover all of your bills, call creditors and discuss your situation. Call them as soon as you realize you won’t be able to pay all of your bills. Do not wait until you have already been turned over to a collection agency; it is generally too late at that point in time to work out a payment plan. Most companies are willing to set up a plan with smaller monthly payments for those people who find themselves in need. It is difficult to admit to someone that you cannot make ends meet and that you need help; however, it may spare you from ruining your credit record and from having your belongings repossessed.
The most important aspect to remember after you have set up a plan with a company is to stick to it! If you find that you still cannot make the payments, call the company again and see if the payments can be reduced. Companies want to see that you are putting forth an effort to pay your bill; therefore, communication with them is important. If you simply don’t pay your bill or don’t stick to the payment plan, they will most likely not be willing to help you.
If you find that you are having difficulty putting together a payment plan and working with creditors, you may consider contacting a Consumer Credit Counseling Service near you. These nonprofit organizations help people organize their resources, set up payment plans and better manage their money.
4. Decide where you cut back. Put on your creative thinking cap and find ways to cut your expenses. It may be as simple as taking your lunch to work every day instead of eating out or clipping coupons. Assess car insurance premiums to see if coverage on older cars could be dropped or if deductibles could be raised, which will lower monthly payments. Call to get quotes from various insurance companies to see who offers the lowest rate. Look for sales on clothing and food. Avoid waste by turning off lights, reusing items, such coffee mugs instead of disposable cups. Walk through your house or apartment with family members to find creative ways to cut costs. Carpool with friends and neighbors and share services, such as babysitting.
5. Find ways to make extra money in times of need. You may find that just a little extra income would help you squeeze through the hard times. Clean out your house and have a garage sale to make a few extra dollars. Put your skills to use. Can you sew? Paint? Clean? Babysit? Make home repairs? Ask friends and neighbors if they need any work done that you could help with. Children may be able to help by getting afterschool jobs or doing work around the house that an outside person would normally do.
If your income recently dropped significantly, don’t give up hope. Take some time to organize your assets and find creative ways to effectively use your skills and your resources, you will find that you can take control of your situation and keep yourself afloat.