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 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 expenses can 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   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.