As the price of goods and services continue to increase it can be quite alarming to realize that your income does not go as far as it used to in covering the basics. It doesn’t take long until you personally feel the effects of price increases to the extent that you have little or no discretionary funds and you strain to pay your bills.
Don’t panic, but don’t become complacent either. Adjust your spending and develop a spending plan to pay bills. Financial affairs are still within your control. It will take work and planning, but you can survive a financial crisis and come out even stronger when it’s over.
The first thing you need to know is where your money goes. If you don’t already have a good idea of your spending habits, track you household expenses for a month or two. This will give you an idea of where you will be able to make changes in future spending. Family living expenses are divided into two categories: fixed and flexible. Fixed expenses include regular expenses such as rent, mortgage, car loan payment and other types of installment credit, health and life insurance payments, and equal payment plans for utilities. Flexible expenses include recreation, leisure, food, clothing, personal care and so on. The family should examine these flexible expenses and make choices on ways to cut spending in these areas.
Household expenses are the key to how well you do when money is scarce. If your family does not follow a spending plan, NOW is the time to start. Family input is essential, as well as being realistic and flexible. Be creative about spending cuts. Remember, you still want to survive comfortably. Here are a few suggestions:
· Control impulse buying; make a shopping list and weigh the importance of each item.
· Practice effective consumer skills. Comparison shop. Buy the specials. Use coupons. Go to price-competitive stores. Buy in bulk. Look for cash discounts. Shop at thrift stores or discount stores.
· Do NOT drop insurance coverage. The need for insurance is magnified by the stress you may be experiencing. However, make sure you are not paying for duplicate coverage by having several policies.
· Do NOT cancel essential medical and dental appointments. In the long run, this may prove to be costly. Some professionals may be willing to negotiate payment schedules if details are worked out in advance.
· Conserve resources by using them wisely - make your home energy efficient and consolidate shopping trips and other errands.
Don’t stop credit payments or ignore the fact that you are facing financial difficulties. Make an action plan as soon as possible. Begin by calling creditors to explain your situation and see if they will lower your interest rate.
Set priorities in paying bills. Pay those that: maintain vital services (e.g., utility, phone, transportation, insurance), have the highest interest rate, cost the most to delay (e.g., late penalty, repossession, or disconnect/reconnect charges), and may be vigorously collected.
What ever you do, be wary of quick, short-term, high interest loans like payday loans. If you miss just one payment you could become saddled with long-term, high interest debt payment that, seemingly, never ends.