|In periods of economic decline many people find themselves squeezed from both sides – facing both rising prices and a loss of income. With constant media reports on how the economy is heading towards a recession you may be worried about how you are going to pay your own bills. While you may not have control over the economy you do have control over the actions that you take to prepare for possible financial difficulty.
With gasoline prices hitting record highs, everyone who drives a car has been affected by rising prices. Changing driving habits could save you hundreds of dollars a year. Consider if you can take public transportation to work or carpool, even if it is only once or twice a week. (If you cannot find anyone to carpool with at your job you still may be able to carpool. Many cities have set up carpool programs. Call Information or check your city’s website to see if this is a service that is offered in your community.) If you cannot carpool to work see if you can carpool with a neighbor to run errands, such as going to the supermarket. If not, try to run errands after work, as opposed to making multiple trips. For places that are close to home walk or ride a bike, instead of driving a car.
Gasoline is not the only price that is rising. You may find that you are paying more for such things as clothing and food. (Overall, in 2007, inflation increased prices by 4.1%, in part because companies are facing their own rising gas costs, and also the declining value of the dollar has increased the cost of imported goods.) It is always a good idea to shop with a list when at the supermarket, to prevent impulse buys. Try avoiding such things as organic foods (which, while good for the environment, usually cost more), desserts, frozen foods (which are often more costly than purchasing fresh ingredients), and expensive meats and cheeses. Consider also if you can get food anywhere else cheaper, like a bulk store, discount supermarket, or farmer’s market. Avoid purchasing food at expensive, gourmet stores. Whatever it is that you are buying, you will save money by purchasing goods on sale. If you are finding it hard to cut back on essential costs, like grocery purchases and gasoline, try cutting back on spending that is more discretionary, like dining out and snack purchases. For example, if you purchase a cup of coffee at $2 every workday, you would save $43 a month by cutting it out!
Many people find themselves in a position where the overtime they were previously given or their regular hours are cut at the same time they are struggling to pay higher bills. If your hours have been reduced try searching for a part-time job. Even though often you will make less money at a part-time job than by working extra hours at your primary job (since you will not get overtime pay, and part-time jobs are often in the service sector) it is a way to bring in extra money until, hopefully, in the future you will be able to work extra hours again at your primary job.
You may be not just worried about your hours being cut, but losing your job altogether. Focus on doing the best job that you can to show your employer that you are a valuable employee. If you think that you are in serious risk of being laid off, updating your resume and references will make you more prepared to start a job search if you do lose your job. At the same time, if you do not need to, avoid starting a new job, which can provide less security because if there are layoffs a company usually starts with its newest employees. Furthermore, avoid taking on expensive obligations that you will not be able to pay if you lose your job, like purchasing a house or new car.
Self-employed people and people that get paid on commission often struggle the most during a sluggish economy, since their income is completely dependent on the business that they do. If your income varies make sure to put aside money during the months you do well to help you pay for expenses during the months that you do not do as well. If you are self-employed and struggling try to seek out help to improve your business. For example, your local Chamber of Commerce or trade organization may offer events where you can get advice and talk to people with experience that can help you. Ultimately, if your business is not profitable consider closing it or scaling back, to find a job with an employer. Likewise, if you get paid on commission and are just not earning much money consider looking for part-time job to provide a steady source of income each month or a non-commission job.
Slow housing market
If you own a home and anticipate financial difficulties selling your house can be a great way to improve your financial situation. It provides an opportunity to lower your housing costs by renting instead of purchasing another home (usually it is cheaper to rent) and use the equity in your house to pay off whatever debts you have. Unfortunately, sales of existing homes in 2007 saw its biggest decline in twenty-five years. However, if you are interested in selling your home this does not mean that you should not try. Your house will definitely not sell if it is not on the market! Prepare your house the best you can (such as by cleaning, painting your walls neutral colors, and removing personal items, like family photographs) to increase the likelihood of a sale.
If you cannot sell your house and have a spare bedroom consider renting it out. Renting out a room is a great way to increase income with little extra effort on your part. You may nervous about letting a stranger into your home (if you have a friend or family member looking for a room it could be ideal to rent to him or her), but by requiring prospective renters to bring their credit reports and provide references you can minimize the likelihood that you rent to someone who will cause you difficulties in the future.
Despite your best efforts to make changes you may find yourself in a position where you do not have the funds to pay your bills. The first step that you should take is to prioritize your bills and make sure that the important expenses are paid first. You would not want to pay your credit cards before you pay your rent or your mortgage. Next, for any bill that you cannot pay contact the creditor and explain to them your hardship. If they know you are struggling they may be willing to allow to you miss a few payments or make lower payments for a few months. Even if you cannot work out an agreement you can still try to send them a small amount to demonstrate that you are still interested in paying. If needed, seek the help of a professional. A certified credit counselor at the BALANCE Financial Fitness Program can go over your budget, discuss possible adjustments you can make, and talk about options for debt repayment. If you are interested in talking to a counselor call us at 888-456-2227, Monday – Thursday 5:00 AM to 8:00 PM, Friday 5:00 AM to 5:00 PM, and Saturday 8:00 AM to 5:00 PM PST.
When you are concerned about paying your bills or losing your job it easy to become stressed and worried. While you want to take positive action to improve your financial situation worrying too much does not accomplish anything. If you feel overwhelmed focus on the positive parts of your life – such as friends, family, pets, or hobbies. The economy is always changing. Today’s bust will be replaced by tomorrow’s boom. When your situation improves remember to put money aside in savings, so that if you face challenges in the future it will be easier next time.