How to Avoid Financial Stress, No Matter What Your Budget

10:35 PM

 Every family goes through lean and fat times. When income dips for whatever reason, especially in one-income households where one parent stays home with the kids, this can put quite a strain on the budget and on your family.

And when unexpected expenses crop up, that can make a serious problem even worse. Your daughter breaks her leg at soccer practice, the car breaks down, you need a new water heater, your son needs braces, you find you are pregnant (again!)... any of these can happen at any time.  

Can you cope?

There are two considerations here…. Coping emotionally and coping financially.  The two are intertwined - if your family did not plan for financial emergencies, then inevitably it is stressful.

I hope you are reading this prior to a financial emergency, but if you find yourself in a situation where income is not meeting expenses, experienced bankruptcy attorney Davd Offen, Esq. recommends you consult a local attorney for a free consultation to discuss debt settlement and bankruptcy options.

If you are reading this to find out how to avoid financial stress… you are in luck. The following tips will help you prepare for the inevitable financial emergency.

Pay off Your Credit Card Debt

This is a big one. If you are not paying off your credit card debt in full every month, you are bleeding money in interest charges. 

Make a plan to pay off your credit card debt by allocating a certain amount to that bill each month - at least twice the minimum payment is recommended. Do not use that card. 

If you have multiple cards, pay the one with the highest interest rate first, paying the minimum on the other cards. When the highest interest rate card is paid off, pay off the next highest, etc. This might take a couple of years, but it must be done.

If you are using credit cards for necessary living expenses and can’t stop… then the problem is that you are living beyond your means. What to do?  Ask yourself, if you weren’t obligated to make credit card payments every month, would you be able to live within your means, on your family's current income stream? If the answer is yes, you might consider filing for bankruptcy protection and getting that debt discharged.

Monitor Your Expenses

Everyone must do their best to live within their means. With regard to your expenses, the old adage applies - if you fail to plan, you plan to fail.  You must have a budget that accounts for all must-haves and allows for some wants too. 

Using receipts and bills, write your monthly expenses down, or make a spreadsheet. Add them up - does your current income cover that amount, plus some?

Don’t feel bad if the answer is no. People who have been managing their household without a written budget are often appalled the first time they see how much they spend each month, and on what, in black and white.  It is akin to going into a restaurant and you are about to order your favorite entree, but they just printed the calories next to each selection and your favorite has more than 80% of your calories for the whole day!

It can be a shock.  Luckily there are ways to cut household spending, among them…

     Get a cheaper cell phone plan or a family plan
     Eat out less - cook more
     Turn off lights and appliances when not using that room
     Turn the temperature of your heat down, and your air conditioning, up
     Downgrade your cable plan or go with internet streaming your favorite channels
     Cancel unused memberships and subscriptions
     When you are driving, combine trips to save on gas (post office & grocery store?)
     Buy used - furniture, clothing, books, movies.
     Grocery shop at big box bulk stores
     Talk to friends with children about a clothing exchange

Keeping an eye on your money is sometimes all you need to rein spending in.

Protect Your Income Stream

You already know you need an emergency fund - all the TV experts say so, and it is one thing on TV you can believe. But how much do you need?

Noted financial expert Suze Orman suggests that eight months is what is needed these days. Here is her excellent article about managing family finances.

You might agree wholeheartedly about needing an emergency fund, but wonder, how do I save that much? Well… how do you eat an elephant?  The answer is, one bite at a time. And that’s how you save too, one small amount at a time.

Saving Strategies

Conventional wisdom says, put 10% of your income away every paycheck before spending money on anything else. But if that is just not feasible, here are some other ways to start saving:

     Change your debit account to one that rounds up when you make purchases, and have the excess amount deposited into savings.

     Use a piggy bank; put all change in pockets and purses in it once a week. Deposit proceeds in savings account once a month.

     Once you pay off your credit cards, continue to pay - yourself! Put that amount into savings each month.

By paying off credit card debt, reining in spending, and saving, you will be prepared to avoid stress if an unexpected dip in income occurs, or if a surprise expense pops up.

But if you are feeling overwhelmed with your financial situation, you might want to talk with a bankruptcy professional about your options.

Author: Veronica Baxter is a writer, blogger and legal assistant operating out of the greater Philadelphia area.

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