Acting quickly will help you understand solutions, limit the damage, and have more hope for the future.
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Hello, my friends I’m Laura Adams, and this is the money girl podcast. I’d been hosting the show since 2008. And my mission is to help you live rich and love the journey before we get started. I want to thank a couple of listeners, Maureen C and Stephen V who emailed me with a clarification for last week show, which was how to use a five 29 plan to manage education expenses. I mentioned that you couldn’t use five 29 funds to pay expenses related to living off campus. What I should have said is that amounts that exceed a school’s allowance for room and board are not qualified. So be sure to contact your school for the qualified room and board amount. So you’ll know how much you can attribute to a student over a given academic period. So you can pay at least that much using your five 29.
So thanks so much for sending in those clarifications. All right, onto today’s topic. I think surviving financial hardship is on everyone’s mind right now while so many people are struggling due to the pandemic crisis and a big part of quote unquote, living rich. It’s not necessarily having a huge income, although that’s fantastic, but what it’s really about is security and having a sense of peace that comes when you know that you can survive a financial hardship or anything that comes your way. Most people experience an unexpected crisis that shakes their financial world. You know, at least once in their life, many people are dealing with us on a monthly basis or even more frequently, it could be losing a job, receiving a huge medical bill, having a car breakdown at the worst possible time. But surviving pandemic is probably a situation that you probably never thought you’d have to face.
Well, we all know the COVID crisis has resulted in more than 165,000. I think it’s 168,000 deaths in the United States so far and put millions of people out of work. If you’re one of them or you’re struggling financially, for any reason, this show is for you. We’re going to cover eight critical rules for surviving the COVID crisis or any financial setback. I’ll talk about ways to manage money wisely, how to stretch your resources, how to find resources and how to bounce back from this unprecedented health and economic disaster as quickly as possible as always you’ll find the notes for each show and the full archive of podcasts in the money girl [email protected] This is episode number 648 called eight essential rules for surviving financial hardship. All right, we’re going to get right into those rules. Rule. Number one is accept your situation and ask for help.
The key to successfully navigating a financial setback is to be realistic. If you’re in denial and you don’t face your money troubles, head on, you can quickly compound the damage. Instead of focusing on the problem, getting angry or letting stress overwhelm you. I want you to channel your emotions into finding solutions. That’s really what successful people do. They channel all of their energy into finding what works, finding the solutions. Start talking about your challenges with people and professionals you trust such as a money savvy family member, a financial advisor, a legitimate credit counselor, or an attorney in extreme cases. There are financial associations who have certified volunteers who can actually give you free help and advice. Check out the national association of personal financial advisors. Look at the financial planning association and the association for financial counseling and planning education. And you’re going to find the links for all of the resources that I give you in this show on the money [email protected]
So don’t feel like you have to write everything down. All of the resources and links will be there for you. Rule number two, get a bird’s eye view of your finances. I think to fully understand your situation. You really have to pull out, zoom out, look at the big picture. So create a list of what you own and what you owe. This is called a net worth statement. And while that sounds pretty fancy and complicated, it’s really not. It’s simply a way to list out what you own and what you owe compiling. All of this information in one place will help you evaluate your financial resources, make decisions more efficiently, and have essential information at your fingertips if creditors or advisors asked for it. So first you want to list out your assets. These are the things that you own. It could be cash in the bank investments, retirement accounts, real estate and vehicles, then list out your liabilities like a mortgage, a car loan student loans, credit card debt, and include the estimated values of your assets and the balances on your debts and the interest rates that you’re paying for each of your liabilities.
And this could be really simple. You could just jot it down on a piece of paper, or you could enter this in a computer spreadsheet, or if you’re using money management software, it’s likely that you can create an automated report that will pull in all of this information for you. Once you get it entered in the first place. Now, when you subtract your total liabilities, so what you owe from your total assets, from what you own, you’ve calculated your net worth. It’s really that simple. This is an indicator of your financial health, and it’s not uncommon to have a very low or a negative net worth when you’re in financial trouble. So get that net worth calculated. I think the act of putting all of that information at one place is going to help you understand your resources, rule number three, understand your cashflow and essential part of bouncing back from a financial crisis is keeping an eye on your monthly income and expenses.
Create a cashflow statement, which again is another kind of fan fancy sounding statement, but it’s really very simple. It lists out your expected income and your typical expenses such as rent utilities, food, prescriptions, transportation, and insurance. Again, you can create it manually or by using budgeting features in a financial program, understanding where your money goes is the only way to prioritize expenses and to cut all non essential spending, listing out everything you spend money on is going to help you understand where you can cut back. Nobody likes making sacrifices when it comes to spending, but it’s going to be necessary in the short term when you’re dealing with a financial setback. So figure out how you can cut all non-essential spending, make those temporary sacrifices. It will help you recover as quickly as possible with less long-term damage to your finances. Rule number four, shop your essential expenses as you review your spending.
When you’re putting together your cashflow statement, it’s an excellent time to compare us and shop your essential expenses. Evaluate your highest costs. First, such as housing vehicles and insurance, since they typically offer the most significant potential savings. For instance, you may be able to move into a less expensive home purchase or lease a cheaper vehicle or shop your auto insurance to find better deals. You can visit sites like bankrate.com to shop around for better rates. Ask your utility provider about assistance programs that offer energy saving improvements at no charge. That can be a pretty easy way to cut your utility bills. Rule number five, communicate with your creditors. So after you’ve dealt with looking at your data, you’ve put together your net worth statement. You’re looking at your income and expenses with a cashflow statement, you’re cutting all non essential expenses. Then you want to look at what else can my creditors do for me?
You want to communicate with them right away. So if you have not been in contact with your creditors and you’re dealing with some type of financial hardship, you need to start a dialogue with each of your creditors immediately. You’re going to come out ahead and get favorable treatment from creditors. If you’re proactive and you’re honest about what’s happening, what’s going on? Why are you having financial troubles? Ask them for solutions such as deferring payments for several months, maybe setting up a reduced payment plan or refinancing alone to reduce your monthly financial burden. There are going to be a lot of different, uh, types of solutions. And it really will just depend on the type of loan that you’ve got. And, and the creditor creditors are likely to ask you about the details of your financial life. They’re going to want to know about your income and expenses and your assets.
So that’s another reason why getting those statements pulled together as quickly as possible will help you have your net worth and your cashflow statements on hand. When you speak to your creditors, be ready to complete any required assistance applications quickly with Halloween right around the corner. Lots of us are excited for spooky, scary, fun, but here’s one thing that shouldn’t scare you. Life insurance policy genius is an easy to use life insurance marketplace that makes insurance shopping a breeze. You could save 50% or more by using policy genius to compare policies. A life insurance policy can last you for decades. So those savings can really add up just head to policy genius.com. In minutes, you can work out how much coverage you need and compare quotes to find your best price. They have policies starting at as low as a dollar a day, and you may even be able to skip the in-person medical exam.
Plus policy genius works for you and they’ll handle any speed bumps you run into along the way. So if you need life insurance, head to policy genius.com right now to get started, you could save 50% or more by comparing quotes policy genius. When it comes to insurance, it’s nice to get it right before I go on. Here’s a message from today’s sponsor, life back tax. Do you owe the IRS thousands and back taxes or those threatening notices, starting to pile up, get ready to get your life back with life back tax life back tax has been helping clients who owe back taxes to the IRS and state. For over 10 years, they’ve saved clients, thousands of dollars. Life back taxes, determined to find the best resolution for every client. Here’s the client success story in March. Tyler S came to life back tax with over 22,000 in debt to the IRS.
The team prepared an offer in compromise to the IRS on Tyler’s behalf and got it accepted for only $100. Visit life back tax.com to read more client success stories and call eight (609) 999-9001. Now to get the fresh start you deserve, your first consultation is free and they only take on cases. They know they can resolve that’s (860) 999-9001. Rule number six, prioritize your dents carefully based on guidance from creditors and any professionals that you may be working with, prioritize your bills and debts carefully. Your goal should be to conserve as much cash as possible without skipping essential payments always pay your necessities. First, your food, your prescription drugs, and your auto insurance. These are the things that you just have to pay first. So don’t spend money on other things. If you haven’t paid for those first, use your net worth statement to rank your liabilities from highest to lowest priority.
So for instance, if you’ve got debt related to child support or any legal judgements, those have severe consequences. So those have to be prioritized. Keeping up with an auto loan is also a very high priority. If you rely on your vehicle for transportation and to get to work and federal student loans are typically a priority. However, they are in automatic forbearance right now through September 30th. And the relief may get extended, uh, through 2020 and beyond. So stay on the lookout from your student loan providers as to what type of relief is available, your unsecured debts. These are things like medical bills, credit cards, private student loans. These are lower priorities, never pay these debts ahead of your rent, your mortgage, your food or utilities when you have a cash shortage. So really understanding which debts have to be paid and which dance can be pushed off or delayed.
This is going to be a really important part of surviving a financial setback rule. Number seven, don’t let collectors force you to make bad decisions. Prioritizing your debts means that some may be paid late or not at all. If a debt collector contacts you about any of your low priority debts. Again, these are medical bills, credit cards, private student loans, any type of debt that is unsecured. It’s not tied to something like a vehicle or a house. If a debt collector contacts you about these low priority debts, don’t allow them to persuade you to pay them before you pay higher priority debts and bills. Predators are going to try various aggressive tactics. I mean, that’s what they do. They are collectors. They’re going to try really hard to collect money from you. They can even do things that are illegal in some cases, in an effort to persuade you to pay what you owe.
So you need to be savvy enough to understand when they are doing something that’s illegal that you can just ignore, or whether they’re telling you something that is valid. So if they’re threatening to Sue you or threatening to ruin your credit, those are actually illegal. And you need to realize that it’s likely that any lawsuit would actually take years and accreditor is much more likely to negotiate a settlement with you than they are to Sue you, especially if you don’t owe them a massive amount of money. Remember that a creditor or a collector cannot send you to jail for civil debts. So remember that, you know, the consequences on most debts are, are limited. However, if you owe child support or you owe legal judgments, those are more severe. And you do need to make sure that you’re staying up to date on those types of debt.
You can be jailed for non-payment of child support in regarding your credit. If a debt collector says, you know, they’re going to ruin your credit. Well, in all likelihood, if you’re already behind on bills, you probably already have that reflected in your credit report. So by the time a collector contacts you, the damage is already done and paying the bill will not improve your credit in the short-term. Now it can be a part of a long-term strategy, but in the short term, it is not going to change anything for you. So make sure that you understand that threat of ruining your credit is something that likely, you know, is pretty shallow rule. Number eight, take advantage of local and federal benefits. If your income and savings have entirely dried up, you need to use local and federal resources to learn more about what’s available in benefits.
So I’m going to list out a few here that, uh, again, I’m going to have links to these in the notes for the show they’re in the money girl [email protected], feeding america.org is a great place. If you want to find out about local food banks, they have a map that you can zoom in and find out what’s nearest to where you’re living right now. The federal food program that you may have heard of is called the supplemental nutrition assistance program or snap. You may qualify for this federal program based on where you live, your income and your family size, making home affordable.gov is a resource that can help you find a housing counselor or see if your mortgage is backed by the federal government and qualifies for forbearance benefits. Dot gov is a great place if you’re just not sure what you qualify for. There’s a questionnaire that kind of walks you through your situation and will help you discover all the benefits that you’re eligible for.
medicaid.gov is the federal health insurance program that you may qualify for based on again, where you live your income and your family size and healthcare.gov is the federal health insurance marketplace, where you may find health plans that have substantial subsidies, making them very affordable. If you earn too much to qualify for Medicaid. So make sure you check out what’s [email protected] If you lost your job and do not have a health plan right now, I know that financial challenges can cause you and your family to experience a flood of emotions. I mean, it can range from anger to fear, to embarrassment, as difficult as it might be to put a financial crisis into perspective. It’s critical. You’ve got to realize that no matter what challenge you’re facing right now, you’re not the first, there are millions of people who are dealing with COVID related financial hardships and millions of people that were dealing with financial hardships before COVID face the fact that your recovery could take a while, do everything in your power that you can right now to manage your budget wisely, by getting organized, seeking ways to earn more and spending less.
Don’t be afraid to ask for help from creditors to seek free advice from professionals it’s out there and take advantage of every local and federal benefit possible. I hope these tips will give you some direction and some resources if you’re struggling right now. And if you’ve got a money question or a dilemma, a great way to keep the money conversation going is to join my private Facebook group. It’s called dominate your dollars to request your invitation.
Visit dominate your dollars on Facebook, or you can text me for immediate access text the word dollars, D O L L a R S to the number three, three, four, four, four. And I hope to see you in the group. You can also visit Laura D adams.com to email me a money question, or you can record it as a voice message that I might even be able to use in the show, just call (302) 364-0308. To leave your message 24 seven and that’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is produced by the audio wizard, Steve Ricky Berg with editorial support from Karen Hertzberg. If you’ve been enjoying the podcast, let us know, take a moment to rate and review it on Apple podcasts. That’s an easy way to give back, show your support and help other people find us. You might also like the backlist episodes and the show notes that are always [email protected]
Regina King for Cadillac Escalade. When people ask Regina, do you like to compete? I say, bring it on. Those are the moments that drive you to achieve more. And when you win, you keep reaching higher to me. That’s what the Cadillac escolade represents. It’s always evolving in technology, in design everything because success isn’t the end. It’s just the first step to what comes next. The 2021 Cadillac Escalade never stopped arriving.
At some point, most people experience an unexpected crisis that shakes their financial world. It could be losing a job, receiving a huge medical bill, or having a car break down at the worst possible time. But surviving a pandemic is a situation you probably never thought you would face.
Along with the public health toll, the COVID crisis has put millions of people out of work. For those struggling financially, here are eight critical rules to help you manage money wisely, stretch your resources, and bounce back from this unprecedented health and economic disaster.
8 rules for managing a financial hardship
Here are the details about each rule to manage a financial setback during the coronavirus crisis.
1. Accept your situation and use your resources to seek help
The key to successfully navigating a financial setback is to be realistic. If you’re in denial and don’t face money troubles head-on, you can quickly compound the damage.
Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions. Start talking about your challenges with people and professionals you trust, such as a money-savvy family member, financial advisor, legitimate credit counselor, or an attorney.
The following financial associations have certified volunteers who can offer free help and advice:
- National Association of Personal Financial Advisors
- The Financial Planning Association
- Association for Financial Counseling & Planning Education
2. Get a bird’s eye view of your finances
To fully understand your situation, create a list of what you own and owe; this is called a net worth statement. Compiling your data in one place helps you evaluate your financial resources, make decisions more efficiently, and have essential information at your fingertips if creditors or advisors ask for it.
First, list your assets:
- Retirement accounts
- Real estate
Then list your liabilities:
- Car loans
- Student loans
- Credit card debt
Include the estimated values of your assets, the balances on your debts, and the interest rates you pay for each liability. You could jot down this information on paper, enter it in a computer spreadsheet, or create a report using money management software.
When you subtract your total liabilities from your total assets, you’ve calculated your net worth, which is an indicator of your financial health. It’s not uncommon to have a low or negative net worth when you’re in financial trouble.
3. Understand your cash flow
An essential part of bouncing back from a financial crisis is keeping an eye on your monthly income and expenses. Create a cash flow statement that lists your expected income and typical expenses, such as rent, utilities, food, prescriptions, transportation, and insurance. Again, you can create this report manually or by using budgeting features in a financial program.
Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending. Making temporary sacrifices will help you recover as quickly as possible with less long-term damage to your finances.
4. Shop your essential expenses
As you review your spending, it’s an excellent time to comparison-shop your essential expenses. Evaluate your highest costs first, such as housing, vehicles, and insurance, since they offer the most significant potential savings.
For instance, you may be able to move into a less expensive home, purchase or lease a cheaper vehicle, and shop your auto insurance to find better deals. Ask your utility provider about assistance programs that offer energy-saving improvements at no charge.
5. Communicate with your creditors
If you haven’t been in contact with your creditors, start a dialog with each one immediately. You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles. Ask them for solutions, such as deferring payments for several months, setting up a reduced payment plan, or refinancing a loan to reduce your financial burden.
Creditors are likely to ask about details regarding your financial situation, so have your net worth and cash flow statements on hand when you speak to them. Be ready to complete any required assistance applications quickly.
6. Prioritize your debts carefully
Based on guidance from creditors and finance professionals, prioritize your bills and debts carefully. Your goal should be to conserve as much cash as possible without skipping essential payments. Always pay for necessities first: food, prescription drugs, and auto insurance.
Use your net worth statement to rank your liabilities from highest to lowest priority. For instance, debts related to child support and legal judgments have severe consequences and should be prioritized. Keeping up with an auto loan is a high priority if you rely on your vehicle for transportation. Federal student loans are in automatic forbearance through September 30, and the relief may get extended through 2020.
Your unsecured debts—medical bills, credit cards, and private student loans – are lower priorities. Never pay these debts ahead of rent, a mortgage, or utilities when you have a cash shortage.
7. Don’t let collectors force you to make bad decisions
Prioritizing your debts means some may be paid late or not at all. If a debt collector contacts you about a low-priority debt, such as a medical bill or credit card, don’t allow them to persuade you to pay it before your highest priority bills.
Collectors may try various aggressive tactics, such as threatening to sue you or ruin your credit. A lawsuit could take years, and a creditor is more likely to negotiate a settlement with you. Remember that a creditor or collector can’t send you to jail for civil debts.
If you are behind on bills, that fact is likely already reflected on your credit reports. By the time a collector contacts you, the damage is already done, and paying the bill won’t improve your credit in the short-term.
8. Take advantage of local and federal benefits
If your income and savings have entirely dried up, use these resources to learn more about local and federal benefits.
- FeedingAmerica.org has a map showing local food banks
- Supplemental Nutrition Assistance Program (SNAP) is the federal food program you may qualify for based on where you live, your income, and family size
- MakingHomeAffordable.gov can help you find a housing counselor or see if your mortgage is backed by the federal government and qualifies for forbearance
- Benefits.gov has a questionnaire that helps you discover the benefits you’re eligible for
- Medicaid.gov is the federal health insurance program you may qualify for based on where you live, your income, and family size
- Healthcare.gov is the federal health insurance marketplace where you may find plans with substantial subsidies if you earn too much to qualify for Medicaid
Financial challenges can cause you and your family to experience a flood of emotions, including anger, fear, and embarrassment. As difficult as it might be to put a financial crisis into perspective, it’s critical. No matter what challenge you’re facing, you’re not the first. There are millions of people who are dealing with COVID-related financial hardships.
Face the fact that your recovery could take a while. Do everything in your power to manage your budget wisely by getting organized, seeking ways to earn more, and spending less. Don’t be afraid to ask for help from creditors, seek free advice from professionals, and take advantage of every local and federal benefit possible.
Published by Debt.com, LLC