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Every Household should have a Plan B, sometimes even a Plan C

So, you have been unemployed for 2 or 3 months now. Or you may have just received news that your position will be eliminated after the New Year. What should you do?

Many households exist without a BUDGET. Money comes in, money goes out - sometimes thousands of dollars exchange hands in a single month with nothing to show for. Names were left off to protect the innocent. Then, there are some households who "think" they have a budget, but never really respect/ abide by it.

When families run into financial difficulties, some may have depleted their savings, tapped into retirement savings and even ask for families to help.

One very stark observation is that families never get on EMERGENCY mode - ie. changing their lifestyles to adjust to the new financial environment.

One thing I constantly hear, "I'm just holding out waiting for God to turn things around. I know it will happen. It will happen real SOON." So, they go on living the next few months as if things will continue to be the same because "God's going to continue to bless me" mentality.

Now, before you get upset, don't get me wrong. I love God with all my heart. I believe in the power of prayers and I believe that God could turn things around for anyone in an instant. But I don't believe God wants us to live in denial.

As a good steward of your finances, whether or not you receive the BAD NEWS, a household NEED to have a Financial Plan B and Emergency Plan C.

Your Financial Plan A is the "currnet" lifestyle you live with the current income you can support your lifestyle with. You must have a Basic Budget.

Your Financial Plan B is when you receive the BAD NEWS. You may need to evaluate what are the lifestyles and expenses you need to cut out. Some examples may include: Manicure/ Pedicure, going out to restaurants to eat, Christmas or vacations, Starbucks, dry cleaning, services for conveniences such as lawn care, shopping and unplanned grocery trips. You may also want to consider trimming back your TV cable services, your cellphone services - Unlimited plans, etc. (You would think these are easy to understand, but you'd be surprised how many don't go in this mode).

Your Financial Plan C is when you need to make drastic measures for basic survival. First, you make sure you have your Basic 4 walls taken care of. This includes your rent or mortgage, your transportation, your food, clothing and utilities. Over and above these necesseties, you make a priority list of what needs to be paid. The word here is "EMERGENCY". Your job is to stretch your financials coming in for as long as you could.

The final and drastic measure would be to consider selling your cars and your home. No one wants to come to this point. But if you do, you may need to get yourself financially and emotionally ready to take on this step.

The biggest problem is that unemployment income was never enough to sustain a household's current income. Yet, families fail to make necessary adjustments for the transition. What they believe is that this is temporary. It is TEMPORARY but TEMPORARY for some, maybe be 2 months, temporary for some could be 18 months or longer.The problem is also to find the position that pays the same to continue living the current lifestyle. Most people have to take 1/3 in pay cut to be in the same position they were in.

The saddest part is that at the beginning, people live and spend as if bad things won't happen. Before you know it, families are in turmoil, emotions are high and divorce is in the picture.

These are REAL for many families. Don't be another statistic. Just like any business practise a Fire Escape plan, you owe it to your family to create a Financial Escape plan. You don't ever have to execute it. But if you do, you have one less thing to worry about.

A business would not go into the following year without a Financial Budget. Why should your household be any different?

Question of the Week:

WOULD YOU FIRE YOU If YOU WERE HIRED TO MANAGE YOUR FINANCES?

If you need a simple Financial Budget to begin your planning, find it here on Budget in pdf format.

The Equity sheet (pdf format) is to see how much you are worth.

PS: I'm sorry that I felt compelled to talk about this right before Christmas. Some financial damages may have been done. But there is still time to correct the problem. I rather plant this in your mind before the holidays, rather than to throw a bombshell at you after the New Year. Too many families have "Christmas" with no budget only to find "surprises" on their credit card bills in January and February.

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Copyright © 2009 by Loreena Yeo (3:16 team REALTY)
Originally Posted on Every Household Needs a Plan B. Sometimes Plan C too.

Posted by Loreena Yeo, Realtor®| Frisco TX Community Ambassador (214)783-2210 on 12/23/2009 05:43 AM

Comments (62)

Household With Plan B or Plan C in the Mortgage / Finance Channel

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Originally posted at: faithfully frisco tx homes for sale: Every Household should have a Plan B, sometimes even a Plan C

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62 Comments on Every Household should have a Plan B, sometimes even a Plan C

DEC

2009

GOOD MORNING LOREENA! I think the timing right before Christmas is important - too many people I know get shocked come January when they realize they were "too" caught up in the holiday giving! Plans are great - my dad always has 5 plans for everything - he takes this very seriously! Thanks for the reminders and Happy Holidays! --Gabrielle

Thank you Loreena. When do you know your like your Dad/Mom? When you have a plan for everything. Regards,

Would I fire me if I were hired to manage my financials? What a great question! Actually, I think I would! Have a wonderful Christmas!

Gabrielle - The only thing I secretly wish is that parents who had unplanned Christmas will return them before Christmas.

Frank - That's too funny comment.

Janna - Many of us would. But it's never too late to try to brush up and polish for that position. After all, isn't why we work so hard for? Is to have a little to show for at the end of the day. But what's most important is to have Financial Peace - the peace that can easily be instilled in our lives if we just plan for it, just like everything else in our lives.

Thanks for sharing. Enjoy the holidays and have a most productive new year!

Loreena, Great post. have happy holidays and a wonderful new year. Good luck in 2010.

Loreena- an excellent post. This year I have re-evaluated a lot of my creature comforts in an effort to save money. It actually feels good to be frugal again.

Loreena

I like the ABC plan I think it may be helpful to many people with so much job uncertainty these days. Cash reserves will only last so long and it is really important to have something to fall back on. Sitting and waiting without taking action is a formula for disaster.

Excellent post and question, Loreena. And great timing too. This year I have been doing my Christmas shopping much more "consciously" rather than willy-nilly trying to grab things just to have something to give. It feels so much more genuine and authentic. Great messages to carry with us throughout the year. -- Tanya in Montreal

Hi Loreena! Many real estate agents are out of this business for that very reason--failure to plan ahead. They spent money like it was water back in the hay-day and now are selling their own homes and working other jobs. They just did not think that the income would ever end. I feel for them and others who have found themselves in a drastic situation with no cushion. It doesn't hurt to give up things until you're back on your feet--makes you appreciate them more when you have them and can then afford them!

Hi Loreena! Another great (& really relevant) post!! A little trimming of the fat for most households can be the difference between surviving and struggling! Happy Holidays!!

Loreena, not only would I "Fire" me----I would never have hired me in the first place.

Thanks for sharing. I had a business prof who said you should treat your finances like a business.

Loreena, you mentioned "financial peace" in your comment so you must be familiar with Dave Ramsey. I read his book "The Total Money Makeover" and it changed my whole families life. I even gave it as a Christmas gift last year to several of my family members. Dave has a very sound financial plan. It's not easy to make changes but it can make a difference in your life. Thanks for your words of wisdom. Especially, at a time of year when we all tend to overspend. Merry Christmas and God Bless!!

I like this post. I listen to Suze Orman show alot. I do not agree with everything she says but her show and this info is something many people should consider if you feel you are struggling.

My answer to your "question of the week" is 'No, I would still be employed.' but that doesn't mean it's always easy to do the right thing. Holidays mean splurges.

Tammie - Yes, as a matter of fact, I'm very familiar with Dave Ramsey and the principles he teach. My husband and I coordinate FPU at our church and we are also ministry certified financial counselors. We help with financial counseling at our church.

What a great great post! My husband and I have learned so much about ourselves, our spending habits, each other, what we REALLY need as a family and how strong our faith is these last two years! Although, it has not been fun, we know now that we can make it and that we are resilient people with a huge love for our family. God gave us the TOOLS to make it through. That is what we all need to remember!!!

Hi Loreena~ For some, the hardest thing in the world is to be on a budget! It is difficult for some to wait until they can actually afford to buy things. Some feel as if it is owed to them and they just keep spending and spending money that they just don't have. Hopefully some eyes will be enlightned by this post!

The easiest way to make money is to spend less, to live below your means and get in to a happen of saving for the what if that could happen, does happen, before it happens.

One very stark observation is that families never get on EMERGENCY mode - ie. changing their lifestyles to adjust to the new financial environment.

Disagree with your observation..maybe this happens where you live. Not in Maine where foreclosures are low, we hurry to pay off the low cost property. And we are in the top ten of places to live where you are not nickel and dimed in an announcement this week. The local folks are brought up preparing for nip and tuck days and teach their kids the same. Kids earn their winter coats, their ipods and take better care of them. They work, know the value of money, and have better impulse spending control. Money is not the fuel for fun here. Outdoor recreation and living within our means is. We don't need or use money to impress anyone. We are comfortable within our own skins and know what the weekly grocery bill is. Kids are taught to not waste anything..turn off lights, don't leave doors open, don't take food they are not going to eat. They see their parents do the same by example. Credit, plastic is not abused because it is taught, talked about around the dinner/supper table.

Great Post Loreena and Happy Holidays. I have always been very conservative for that very reason.

Loreena, I love the idea of being a financial counselor at your church. My husband and I have recently been thinking of an area we could serve together. Since this is something we're both passionate about, that may be a good area for us, as well. Thanks for the idea.

Andrew - It does sound like Aroostok County in Northern Maine is a very financially savvy place to live - especially living in a place where children are taught to work.

Not quite the same here in the Dallas suburbs. Teenagers are told that the world around them are not safe. They play computer games all summer long. They no longer mow yards or babysit for pocket money.

Forget about wasting food. I silently weep when I see huge portions of leftovers of food thrown away by restaurants knowing that there are hungry people out there, especially in the cold.

Credit has taught Americans instant gratification. There are not many people that can say they use CREDIT responsibly. When is it responsible and when is it not?

Watching Maxed Out has turned me away completely from credit. I will not do business with people who treat people as numbers. I can only control what I do. But I believe one credit down at a time.

I agree that it is sooo important to have a plan B. I recently am going through major life changes that luckily since I was prepared I am going to be OK. Stressful but relieved and empowered because I will survive on my own.

Tammie - This job is not easy - at least for us. Church people represent most of America. When there is no financial emergency, life is good. The spending is great. We offered to help those who are not in financial dire, but didn't get favorable responses.

However, my church made it a point that people need to visit with us prior to the church helping them - it's also the only reason they see us. It is disheartening. Someday, this will get better.

Loreena - What a great message, especially for this audience and this economy. Personally, hubby and I initiated Plan B about a year and half ago and I truly believe that is what kept us from having to initiate Plan C. Funny thing is, we adapted to Plan B pretty well. The only thing I really miss is our annual ski vacation that we take every year at this time and the weekend jaunts we would take throughout the year.

After looking over our year-end budget and expenses and putting together next years budget and expenses, we just may be able to work a nice vacation and a couple weekends in. Definitely something to look for and work towards. Have a wonderful Christmas Loreena and best wishes for next year.

Thank you for the post. We all have come in contact with many people who have lost their jobs (and their homes) this year. A commission based business like real estate has its challenges when it comes to budgeting but I like that I can make choices to assure my income. People who work as an employee have someone else deciding how much they work and how much they earn and if they even have a job.

My church offers classes connected with Crown Ministries. Anyone familiar with them?

I can see where this job would be a difficult one, especially now. Good things to ponder.

Hi Loreena! I wouldn't fire me because I keep an emergency account for just in case and I've been doing that for years. I budget for Christmas and birthdays. I watch our bills like a hawk. When I see a bill that has gone up, I put the difference into the emergency fund. You never know what can happen in life. I think people live in denial and they think things will get better, etc., but most times, it gets worse. If my husband were to lose his job tomorrow, we will be fine. I'm also saving for college for my son. When will I be able to retire? lol.

Great post and have a Happy New Year!

Through the years I have learned to work hard, and leave the rest in God's hands. I admit I do not follow a budget as much as I could. I know what I have to make each month. Extra goes into savings. When lesser months come along, that is why we have savings. We have some retirement and life insurance, albeit we could probably get more. With faith and time comes an understanding that you can work yourself to death and still not make the bills. That is when you learn to trust God, and He never fails! But never lazy faith.

Deanne - I did the Crown Ministries thing. I didn't want it to clash with my business though so I let it go to the wayside.

Loreena, I have lived through a survival Plan C on my own in a past life and that emergency fund of like six months to live off of, it is not enough. It should be at least a year!!

I think a key to successful family budgeting is also making sure that everyone is on the same page. It is rare that two people in a relationship have the same financial apptitude. In this case it might be best to let the person with the better financial management skills (and discipline) manage the household budget. Of course input from the other spouse is necessary, but SOMEONE has to control it. Otherwise it spirals out of control. Great post and best of luck to you Loreena.

You ROCK!!

I think this is a GREAT time to post about money.

And no I wouldn't be FIRED...maybe on probation though. ;)

Great info. So many people are struggling right now. This definitely is a good guide on what to prioritize.

Great blog and awesome outlook on what we all should do. And to answer your question, I wouldnt get fired.....because I WOULDN'T hire me to do my finances...Unfortunally I try to do them anyways.

neve more true in today's times

God helps those who helps themselves.

This is important -- and important to think of this time of year when people tend to over spend.

Hi Loreena,

Great post! If more people would pay closer attention to their spending habits, the consequences wouldn't necessarily be as grave if an emergence situation arose.

This is a great post and your timing is perfect. Great words of wisdom.

Loreena, Good post. I'm not sure than many have even a Plan A! Much less the backups. I like to have my plans in place.

I wouldn't fire me today. But I sure wish I could have written a letter to my younger self knowing what I know now.

Hi Loreena !! Boy this one is truer for more folks than ever before. And hindsight is 20-20, so those who procrastinate, should take note here and start to develop their plan As and Bs.... I think I may even have a plan D if it ever came to it !

Cheers my friend, and very Merry Christmas to you, Boomer and the family :o)

Good stuff Loreena. I have been in plan B for several years now. Mostly to change my spending habits in order to simplify my life. Of course the key for me is to stay on my plan even when income is on the rise.

Loreena - Having a Plan B & C are always a must. My life suddenly changed when my husband was in a horrible car accident and ended up losing his job because of it.

You are absolutely right "unemployment income was never enough to sustain a household's current income" my husband get's about 10% of what he use to make.

Being in Real Estate where I can't necessarily count on money I've always had a plan B & C. I never wanted to use it, but I'm glad we had them in place.

Happy Holidays!

Stop stop stop, no no no,....ok, your right. I need to do this and I need to get it done yesterday. Thanks for the homework!

I am always amused that Realtors, many of whom do not have a budget or a business plan advise clients about Plan B. Sounds like you have your budget down just fine.

We were forced into plan B when my husband was laid off but then after he went back to work, we stuck with saving money. Never know when something might occur or he could be laid off again. I find it more comforting to have cash than "stuff." As I was reading your article, it dawned on me that I have not been to Starbucks in two years. I used to love those frozen green tea drinks. We make things like that at home now if we want it. I plan our meals and stick to my grocery list so that I know what my food bill is going to be. It actually makes things simpler. I don't think I would fire me. =)

As far as this post goes... this already happened to me... i went into drastic money expense cutting mode, when my income dropped...... then I lost my job and I cut even deeper... i sold my car... gave most of my worldly posessions away and moved to Chicago.......

We will see what happens....... I have gotten a job at a Red Lobster here in the area...and I hope to have a nice place to live very soon... God willing.

I have my FL. real estate license in force with a referral company.......

and I am at a good church......

=-)

Hi Loreena,

As always a goog post today. i enjoyed it. Have an option/plan in place is always a good thing. it's like life insurance, when you need it.....it sure is good to have it!

Happy holidays to you and yours!

Patricia/Seacoast NH

As usual, your points were right on target. And once you get used to the change in lifestyles, it becomes much easier to handle.

I think agents, in particular, should heed budget advice since money comes and goes sporadically.

Loreena, great post and it is so important to have a budget plan for all emergencies.

Thanks for making a great point, Loreena. It makes me realize I need to solidify my personal & business financial planning. It is a goal I have for this year. While many experts predict improvement in 2010, I think we should always have plan B and C (even in the best of times). There are many areas of life where one can trim the "fat" and save a significant amount of money each month. Then again, it all depends upon lifestyle vs. needs and no two people's are the same. You last line really hit home... I don't think I'd hire myself, but working to change it! The truth hurts sometimes, but that's how we improve ourselves. I hope you have a great holiday!

Loreena, Excellent post. Very detailed, useful information that can apply to anyone.

Wow Loreena--great great great post. I re-blogged.

MERRY CHRISTMAS, MY FRIEND.

Loreena,

Excellent post. Everyone needs a plan A, B & C. Also critical in all this is a much larger than folks realize EMERGENCY Savings plan. The car will break, the HVAC will need to be replaced, medical bills, etc. It makes no sense to put your head in the sand and think you will automatically go back to where you were.

I have had a number of experiences recently, where folks were not at all realistic with their current financial picture. When they needed to jump ahead to your plan C, they had their heads in the sand trying to live on plan A. I even recommended something of a step back method to their agent, only to find out she was their sister-in-law. I hate to see the head in the sand behavior.

Also, interestingly, along the lines of the question you asked at the end, very interesting thought, would you hire yourself to be your own Realtor?

Merry Christmas, Michelle

It's good advice to people to have additional plans with these tough circumstances.

DEC

2009

Hi Loreena,

Great post and very timely.

My best friend just went through a loooonnnng layoff. Almost 2 years since his last full time job in his career field. He did do some consulting work, got his real estate license and worked with me for a while, took plenty of jobs he didn't like. Finally one led to a full time position for him. They are a great Christian family and excellent stewards. They got by for 2 years on plan "C". Might even have been a plan "D" for while :-). But they were prepared and blessed. Kept their house and credit intact.

BTW, I liked this so much I reblogged it. Thanks for sharing!

Merry Christmas!

Fiscal responsibility is a bitter lesson to learn but probably something that we all have lived through at one point or another. Naturally the ability to change quickly and efficiently is the key.

DEC

2009

Bad things happen to good people. I guess that's all I have to say about that.

JUL

2010

Just reviewing some of the great featured posts of the past today looking for inspiration and ideas for writing some new content for my lethbridge homes for sale blog. I believe I left you a comment back when you first posted this one. Have a great week ahead.

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