Temporary income may buy the gift of financial stability

It is estimated that close to 500,000 people may find temporary employment this holiday season, putting some much-needed money into the wallets of consumers who haven’t had a paycheck in months.

There will be many legitimate uses for this money, but it will only stretch so far. Therefore, MMI and the NFCC suggest prioritizing the use of this money in the following order:

  1. Bring all living expenses current – Housing, utilities, and insurance payments are at the top of the living expense list, as these must-haves need to be seen as priorities. The basics of keeping a roof over your head, food on the table, gas in the car, and the lights on will go a long way toward restoring stability to your home life.
  2. Catch up on all secured debts – For most people, their largest secured loan is a vehicle. Don’t risk losing it to repossession. Down payment money was used at purchase, followed by monthly payments. This money will be lost if repossession occurs. Further, fees associated with the repossession will be added on. If you can’t totally catch up on past-due payments, call the lender to inquire about an extension, providing a specific payment plan that will bring you current.
  3. Pay past-due debt obligations – If you have credit card debt, you need to honor the commitment you made to repay per the conditions of the contract. Not doing so will result in negative marks on your credit report, a lower credit score, late fees, and the potential of a judgment or wage garnishment being filed against you. Your access to existing and future credit will be minimized, putting you in the position of having to pay cash for all goods and services. It can be difficult to obtain new credit in this economic environment, thus making it critical to treat existing credit responsibly.
  4. Make any needed home or auto repairs – With a reduced income, it is likely that home and auto repairs have been neglected. Now is the time to address those, as delaying may only worsen the problem. While you’re at it, consider weatherizing your home for the winter months which could result in a nice savings on your utility bills.
  5. Sock away 10 percent into savings – A well-funded savings account is insurance against financial disaster. Today is the time to protect tomorrow by opening and contributing to a savings account.

Even though saving is important, in this situation it is critical to bring past due accounts current before addressing saving. That will prevent eviction, foreclosure, repossession, and protect your existing credit, while making a significant step toward financial stability. Even though it will be tempting to spend this money on holiday gifts, it is more important to think long-term. Without a steady income in sight, bringing past-due obligations current will allow you to start the New Year on more solid financial ground.

This guest post was provided by the National Foundation for Credit Counseling (NFCC). Money Management International is a member of the NFCC. The NFCC is the nation’s largest and longest serving national nonprofit credit counseling organization. NFCC Members annually help over three million consumers through close to 800 community-based offices nationwide.

Jessica Horton is a former copywriter and community manager at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.