In 2010, many families are dealing with financial stress. Unemployment is over 10% and the Underemployment rate (individuals who are working at jobs for less pay than their previous employment) is close to 20%. Foreclosures are expected to reach almost two million homes.
Any time financial stress rises, there is an increase in marital problems. Divorce increases during times of financial hardships.
But there are key strategies that families and individuals can utilize to better deal with financial stresses:
1) Examine your financial situation. Consider three factors: Income (this is something you can control, either by working more hours, finding a better job or having a decrease in income). Fixed expenses (like mortgages, fixed installment loans, etc.). Variable expenses (credit card bills, voluntary expenses like eating out; shopping, etc). The difference between income and expenses is your net income or loss.
2) Plan for the unexpected. Most Financial Planners recommend that individuals have 3 to 6 months in financial reserves in case of a job loss or illness. But if the worst happens (job loss, salary reduction or sudden increase of expenses), there are additional steps individuals and families can implement:
- Call the credit card companies and ask if a reduction in interest rates might be available. It is not as common as in the past, but most credit card companies want to be paid, and not to claim a judgment against one of their clients.
- Talk to your mortgage company. Congress has passed programs to encourage people to "modify" their loans by either lowering interest rates or extending the length of the term of the loan. Understand, the old saying that "there is no free lunch" is still true. A loan modification may not make your financial situation better in the long term, but if you are facing job loss you may not have a choice.
- Reduce or eliminate unnecessary expenditures. Cutting back on dining out every night or delaying a major purchase can improve your cash flow.
- Build your resume. Many individuals seek second jobs or return to school. The job market is a very competitive market. If more and more people are unemployed, the competitive pool for a job is very difficult. In this difficult market, it is important to improve your education and skill sets to increase your chances at a better job or to retain your job.
Tips for dealing with creditors.
Creditors may attempt to collect debts, and they can do this several ways. They may send collection letters to people who owe them money or they may even bring a lawsuit to collect a debt. If you are sued:
Contact a lawyer immediately. The debt may or may not be legitimate. There may be problems that the creditor has in collecting the debt. For example, the Statute of Limitation on the debt may have expired; the creditor may not be able to prove that you actually owe the money. A lawyer is trained to assist you defending against the debt.
If a judgment has been awarded against you, contact a lawyer immediately. A creditor can garnish your wages; record a lien against your real or personal property; garnish your bank accounts or take other actions. A judgment against you stays on your credit report for a period of 10 years. This can affect your ability to purchase items in the future. In Illinois, a judgment can be "revived" for a period of 21 years. This is a long time for a mistake made in your early years to continue to affect your present and future financial decisions.
Bankruptcy. While many people don't like the idea of filing bankruptcy, millions of people file bankruptcy every year. It prevents creditors from levying on your wages or bank accounts or foreclosing on your home. Again, consult an experienced attorney to help you navigate this area.
Submitted by Springfield Moms sponsor Watson & Linder: Attorneys at Law. For more information on their services, which can assist you in planning and dealing with financial stresses and crisis, visit our Mom's Choice Directory.
