Living and Spending Beyond Your Means
After a few years, even a small, month-to-month negative cash flow will lead to financial crisis, and it will take important changes to overcome it-keep track of what you spend.
Saving regularly, even a little at a time, will give you a cushion you can rely on when something unexpected happens. This means thinking about saving before a big splurge, such as buying the newest plasma television, or finding ways to save on the little things you spend money on every day. Your savings will give you more flexibility in life choices and a financial cushion that you may need if something goes wrong.
Divorce means expenses increase while household income declines. Divorce itself pulls in legal fees, moving costs, and countless other expenses and they simply start adding up. In addition, you may be responsible for debt that your spouse accumulated, such as taxes car payments, or other instances of joint obligation.
To ensure you are in the best position if divorce occurs, have your own credit card and be responsible about paying it on time and keeping your balance down. Don't incur all of your joint expenses under your name, and ensure that your joint assets are under both your names.
Divorce is a stressful time, and you may feel like splurging on yourself. To keep those understandable impulses in check, look at where you want to be financially in a year. Having lower debt or higher savings will give you confidence and security.
Losing a Job
With the inevitable fluctuation of the American economy and the changes occurring in American business, many Americans will experience job loss during their lifetimes. Unemployment is never fun nor does it help with overcoming debt, and, as a result, can compound on all the other stressful things in life that cause debt-such as divorce.
Most financial experts advise having at least three months of your disposable income saved and available for emergencies such as unemployment or divorce.
Depending on the job market and the overall health of the economy, a job search can easily take three to six months - or more. Make sure to apply for unemployment right away and allow the benefits to mitigate the effects of unemployment. If you know ahead of time that your company may be downsizing or closing, limit your expenses and curtail your spending.
Don't pay your bills late or incur other fees. If you can't pay all of your bills in full, call your creditors before you get behind, explain your situation, and ask for a payment plan that enables you to pay what you can.
If you must take a job with less pay than your previous job, adjust total spending to that reduced income and create a realistic plan for paying off any debt incurred during unemployment.
Unexpected Health or Medical Expenses
When a health or medical crisis hits you or your family, it can be devastating both financially and emotionally. If unemployed, lost income through medical expenses can be more than just stressful. Even with health insurance, the co-payments add up very quickly. Identify where you can cut non-essentials and ensure that no big purchases are made.
Track your medical and health expenses carefully. Accounting errors - by both medical providers and insurers - are not uncommon and can add unnecessarily to your costs. Also, explore all your payment options.
- Review bills to ensure they are accurate.
- If you have health insurance, check each benefit statement to be sure you are receiving coverage for all the services your plan provides.
- If you don't have health insurance, talk to your hospital or health care provider about programs that offer free or discounted care.
- If you are unable to pay your medical bills on the payment terms offered, talk to your health care provider, hospital, or doctor about a payment plan.
- If you are unable to pay other regular bills in full, let your creditors know your situation as soon as possible, and ask to work out realistic payment plans so you don't end up incurring additional costs.
Daniel Cho is a financial writer for Select Debt Relief specializing in consumer debt and alternatives to bankruptcy. Currently he studies Business and Theatre Performances at the University of California at Berkeley where he is an active member of the Lambda Phi Epsilon Brotherhood- Delta Chapter, and Theatre Rice- Modern Asian American Theatre Performances.