Dr. Richard Stephens, Contributor
IT HAPPENS to the best of us. You lose your job, your investment portfolio takes a nosedive, your debt gets out of hand. Whatever the financial setback, taking corrective actions early will help you weather the storm. Dr. Richard Stephens CPA, offers the following guidelines for coping with financial problems:
COMMUNICATE WITH YOUR FAMILY
It's important to look realistically at your situation and bring the family together to discuss the matter. Children sense difficulties at home and being uninformed only increases their anxiety. You should work together, as a family, to decide on a plan of action.
DEFINE PRIORITIES
One of the greatest challenges involved in managing a financial crisis is realising that you cannot spend the way you did before. Careful planning and wise spending decisions are critical to maximising your income. If you are faced with reduced income, cut back on spending and develop a plan for paying your bills.
CREATE A REALISTIC BUDGET
First, add up your current monthly take-home income from all sources. Consider whether other family members can contribute income from a job, dividend, rent, or other sources. Then compare the total of this income with the total of your monthly expenses. Budget for the most important items such as housing, utilities, insurance, food, credit payments, transportation, and medical care. Remember, some bills are only due a few times a year, so you'll need to set aside some money each month for those expenses.
If your expenses exceed your income, figure out the most important things you must spend money on and give up, reduce, or delay less important expenses. Borrow only as a last resort. And don't make any quick decisions about your retirement money. If you tap into your retirement funds, it's possible you'll pay income tax, a significant penalty, and jeopardise your financial future as well.
CONTACT YOUR CREDITORS
When your income can't meet your expenses, do not ignore your bills. Contact your creditors and try to work out temporary repayment arrangements. In most cases, businesses are willing to negotiate, but you must take the initiative. Offer to pay a realistic amount until you get back on solid financial footing. Be careful not to overestimate how much you can repay. If you don't keep in step with your agreement, the lender may seek repayment through other means, such as legal recourse.
SEEK ASSISTANCE
Take advantage of job training, counselling, money management classes, government programs, and community resources that can positively impact your financial situation. If your debts become unmanageable, contact the Credit Counselling Service nearest to you.
DON'T MAKE RASH DECISIONS
Coping with the stress and pressure of reduced income is not an easy task. There is often a great deal of emotion involved in financial setbacks. Take the time to assess your financial situation and determine whether professional help makes sense. A CPA can provide overall financial advice that can help you overcome a financial setback.
Dr. Richard Stephens is a partner with FEMAT Richard Wayne Alberga Stephens and Company, certified chartered financial consultants, incorporated financial acccountants and management consultants. Mail: fmat@cwjamaica.com.
