Every Household should have a Plan B, sometimes even a Plan C
How many plans do you have at this time?
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.
Related Articles:
- When Finance is More Than Head Knowledge
- The Real Hard Truth about Homeownership
- Time Value of Money in Closing Costs
- Unconventional Financial Advice for Newly Weds
- Can Dave Ramsey Principles Work for All America?
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Loreena Yeo
Frisco TX Realtor® / Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.comCheck out my Frisco TX Homes website.
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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.
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