One of my previous post highlighted the phases of financial counseling and some possible causes and cures. For this post, let’s focus solely on the Remedial phase. This is the most urgent phase and quite interestingly has some of the quickest fixes.
To recap, the remedial phase of financial counseling really refers to those individuals who are having trouble with cash flow on a monthly, weekly or even daily basis. Those in this phase often have problems making monthly payments, keeping the utilities on or other short-term issues. While no list could encompass every possible reason, the list below lays out a few of the major reasons you might find yourself in this phase.
- Job loss
- Reduction in income
- Medical event
- Spending plan (or lack thereof)
- Family addition/loss
On the surface these fairly common events seem to be very different, but at the heart of the financial side of things, they’re eerily similar. All involve some type of adjustment to income levels or adjustment to outgoing expenses. All necessitate the need for future adjustment and more importantly prior planning.
Cures
How do you plan for the unexpected? While there is no simple answer, there’s one standard answer that you will likely hear from any financial counselor – if you plan for everything, nothing is unexpected.
At the heart of the matter is your spending plan. Set your spending plan so that you’re allowing for at least six months (three months is the absolute minimum) of monthly expenses in savings. This buffer will help you get through tough times when hit with income reduction or job loss. It will also allow time for you to adjust for future items in your spending plan that need to be adjusted based on your new income.
Plan for events that impact your family status – things such as childbirth, divorce and funerals all come with a cost. Budget far enough out that you don’t need your credit card to get you through the expenses.
Easier said than done? Not really if you follow these steps:
- Sit down with a certified financial counselor
- Develop a spending plan and follow it
As I have said in previous posts and will certainly say in future ones – get help from a professional. The first step to getting out of a rut is often just extending your arm for someone to help you.
Ask yourself this, “What would I do if I won the lottery tomorrow?” Whatever your answer was is what is most important to you – take the first step to getting there today.
About the Author: Donnie Peaks is the director, deposit services for Truliant and is responsible for all consumer and commercial deposit accounts and products (checking, saving, money market, certificates, etc.).
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Don’t forget that Truliant members can access free confidential financial counseling simply by calling the BALANCE Financial Fitness Program at 888-456-2227 and the are open evenings and Saturdays. Truliant provides this counseling at no cost to the member though their sponsorship of the program
Excellent post Donnie. I appreciate your words on taking the proper steps. So many people want to jump strait to the debt payoff phase and never address the fact that they are still digging their hole. Debt stabilization may be the most important step in a successful recovery.