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When Your Income Decreases
The MMI Online Articles are designed to inform, assist, educate and alert consumers.
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If an illness, injury or job loss causes you to face a financial crisis, do not assume that things will improve quickly. Living as though nothing has changed is the number one mistake people make during challenging times. Instead, try to realistically determine a reasonable amount to pay to your creditors each month.
Remember that not all of your debts equally impact your family. Pay your rent or mortgage first. You must also make arrangements with your utility companies and you must provide food for your family. Please do not be tempted to allow your insurance to lapse.
-First priority debts include your rent or mortgage, tax liabilities, insurance premiums, auto loans, and utilities.
-Second priority debts include secured loans through finance companies.
-Third priority lenders include retailers, hospitals, doctors and credit cards issuers.
Once you have a plan, mail a letter to each of the creditors explaining your situation and how you plan to repay your debt. Tell them that you are unable, not unwilling, to repay. Remember, it is always best to contact your creditors before they have to contact you.
Sit down with your family and discuss ways to cut costs. For example, check out books from the library and rent movies rather than going to the theater. Dining in and avoiding convenience foods can also save you a lot of money very quickly.
In addition to your savings, research other resources you can tap. Do not fall victim to predatory lending tactics; quick cash loans are short-term solutions with long-term consequences.
-Borrow from yourself. While cashing your IRA is not desirable, you can take a short-term loan with no penalties. The only requirement is that you pay back the entire amount borrowed within 60 days.
-Take a good look around you. Most likely, there are many things in and around your home that you could sell for cash. Remember, one man’s junk is another man’s treasure. Also, if you have the room, consider taking in a boarder.
-Seek employment. Secure a temporary job to help you through this set-back, even if it is not in your field of expertise. If you are married, ask your spouse to do the same.
-Use all available resources. Research all sources of cash. For example, you may have a life insurance policy with a cash value. Collect on monies lent to family and friends.
In addition to your personal efforts, don’t be shy about seeking the help you deserve. Contact your local city offices about benefits such as unemployment pay, food vouchers, and utility discount programs. You can also seek assistance from your local church or United Way.
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