Monday, June 1, 2009
Make a plan now for financial uncertainty
In uncertain times, be certain of your plan to deal with the unexpected
http://www.detnews.com/article/2009...001/Make-a-plan-now-for-financial-uncertainty
If you fear a layoff is looming, a cash crash is coming or some other monetary time bomb is ticking, it's time to make your financial emergency plan.
You don't need to stock batteries and Spam, though it couldn't hurt, but you do need to ruthlessly assess your financial situation, your emergency resources and your alternatives -- for the long run, warns Mary Hunt, author of "Debt-Proof Living" and the debtproofliving.com Web site.
"There's just this fantasy out there," Hunt says. "People are holding on until the real estate market comes back or until they get their six-figure job back, and they think this is temporary. Folks better not plan on that. The road ahead is going to be rough."
The best shock-absorber is lots and lots of cash. Barring that, be prepared to make big changes to your standard of living and your attitudes about money and life.
Quantcast
⢠Go big: Skipping your morning latte and canceling HBO won't cut enough spending to get you through a financial crisis. You need to make big cuts right away to stretch whatever cash you have or still can earn, Hunt says.
"If you don't have at least six months of living expenses tucked away in a bank, you are in trouble," Hunt says. "If you don't know what six months of expenses is, it better be $20,000 in cash -- and I don't mean your 401(k). Don't wait until you're bankrupt. You need to get to work and find your big thing."
How big? Try selling a car, pulling the kids out of private school, taking in a roommate or boarder, renting out your house and moving in with family or putting your home on the market -- even for a short sale.
⢠Manage your debt: Handling a financial crisis means keeping the lights on, prescriptions filled and food on the table -- not guarding your precious 780 credit score, notes Gerri Detweiler author of "The Ultimate Credit Handbook" and adviser to Credit.com. If that means stiffing Visa to pay the water bill, so be it.
"We've been told you've got to protect your credit at all cost," Detweiler says, "but what you've really got to focus on is protecting your family from financial disaster."
Concentrate on paying secured debt -- such as a mortgage or car note -- if you want to keep the house or car -- then prioritize your other debts, she says. Going to a service accredited by the National Foundation for Credit Counseling can trim your interest rates, but you'll have to call your creditors and get into a hardship program if you need to reduce your principal balance or even suspend payments until you get back on your feet, Detweiler advises.
In some cases, after a few months of not being able to pay, you may be able to negotiate the debt down. It hurts your credit and you may have to pay tax on the forgiven debt, but it's worth considering.
Be wary of a debt negotiating firm or any other debt solution company, she says, and first check the Credit.com advice, "Fourteen Questions to Ask a Settlement Company."
⢠Prepare for the worst: Before you run up credit-card balances or run through cash in hopes of getting through a crisis, stop and ask yourself: Can we really make it, or are we just postponing the inevitable?
"If you're having trouble making your payments now, it's just going to get worse," says Liz Pulliam Weston, author of "Your Credit Score" and a personal finance columnist for MSN.com. "If you're pretty much doomed, get help now while you have some options instead of flailing around and letting things really go down the toilet."
That could mean talking to a housing loan counselor or bankruptcy attorney, or even considering walking away from a home you can't afford and can't sell. One thing to absolutely avoid is taking money from an Individual Retirement Account or 401(k) that can be protected in a bankruptcy filing. "If you are thinking about tapping your retirement funds you need to talk to a bankruptcy attorney first," she says.
⢠Get ready to go: There's no reason a pink slip should come as a surprise. Get ready now, experts say, to make a clean getaway and start a new job hunt.
That means copying personal files and contacts from your work computer, and collecting training certificates, company awards, references and any other material that can help you land a new job.
Also pull together documentation for any benefits you'll be in line to receive after you leave, including pension plan documents, employee handbooks, unpaid expense reports, payroll documents and even a copy of your personnel file.
"None of this is easy," says Weston of MSN.com. "It's human to be optimistic, but you have to prepare for the worst."
Make a plan now for financial uncertainty
In uncertain times, be certain of your plan to deal with the unexpected
http://www.detnews.com/article/2009...001/Make-a-plan-now-for-financial-uncertainty
If you fear a layoff is looming, a cash crash is coming or some other monetary time bomb is ticking, it's time to make your financial emergency plan.
You don't need to stock batteries and Spam, though it couldn't hurt, but you do need to ruthlessly assess your financial situation, your emergency resources and your alternatives -- for the long run, warns Mary Hunt, author of "Debt-Proof Living" and the debtproofliving.com Web site.
"There's just this fantasy out there," Hunt says. "People are holding on until the real estate market comes back or until they get their six-figure job back, and they think this is temporary. Folks better not plan on that. The road ahead is going to be rough."
The best shock-absorber is lots and lots of cash. Barring that, be prepared to make big changes to your standard of living and your attitudes about money and life.
Quantcast
⢠Go big: Skipping your morning latte and canceling HBO won't cut enough spending to get you through a financial crisis. You need to make big cuts right away to stretch whatever cash you have or still can earn, Hunt says.
"If you don't have at least six months of living expenses tucked away in a bank, you are in trouble," Hunt says. "If you don't know what six months of expenses is, it better be $20,000 in cash -- and I don't mean your 401(k). Don't wait until you're bankrupt. You need to get to work and find your big thing."
How big? Try selling a car, pulling the kids out of private school, taking in a roommate or boarder, renting out your house and moving in with family or putting your home on the market -- even for a short sale.
⢠Manage your debt: Handling a financial crisis means keeping the lights on, prescriptions filled and food on the table -- not guarding your precious 780 credit score, notes Gerri Detweiler author of "The Ultimate Credit Handbook" and adviser to Credit.com. If that means stiffing Visa to pay the water bill, so be it.
"We've been told you've got to protect your credit at all cost," Detweiler says, "but what you've really got to focus on is protecting your family from financial disaster."
Concentrate on paying secured debt -- such as a mortgage or car note -- if you want to keep the house or car -- then prioritize your other debts, she says. Going to a service accredited by the National Foundation for Credit Counseling can trim your interest rates, but you'll have to call your creditors and get into a hardship program if you need to reduce your principal balance or even suspend payments until you get back on your feet, Detweiler advises.
In some cases, after a few months of not being able to pay, you may be able to negotiate the debt down. It hurts your credit and you may have to pay tax on the forgiven debt, but it's worth considering.
Be wary of a debt negotiating firm or any other debt solution company, she says, and first check the Credit.com advice, "Fourteen Questions to Ask a Settlement Company."
⢠Prepare for the worst: Before you run up credit-card balances or run through cash in hopes of getting through a crisis, stop and ask yourself: Can we really make it, or are we just postponing the inevitable?
"If you're having trouble making your payments now, it's just going to get worse," says Liz Pulliam Weston, author of "Your Credit Score" and a personal finance columnist for MSN.com. "If you're pretty much doomed, get help now while you have some options instead of flailing around and letting things really go down the toilet."
That could mean talking to a housing loan counselor or bankruptcy attorney, or even considering walking away from a home you can't afford and can't sell. One thing to absolutely avoid is taking money from an Individual Retirement Account or 401(k) that can be protected in a bankruptcy filing. "If you are thinking about tapping your retirement funds you need to talk to a bankruptcy attorney first," she says.
⢠Get ready to go: There's no reason a pink slip should come as a surprise. Get ready now, experts say, to make a clean getaway and start a new job hunt.
That means copying personal files and contacts from your work computer, and collecting training certificates, company awards, references and any other material that can help you land a new job.
Also pull together documentation for any benefits you'll be in line to receive after you leave, including pension plan documents, employee handbooks, unpaid expense reports, payroll documents and even a copy of your personnel file.
"None of this is easy," says Weston of MSN.com. "It's human to be optimistic, but you have to prepare for the worst."
