August 23, 2007

Surviving a financial setback

Even with the best-laid plans, financial setbacks can happen. If an illness, injury or job loss causes you to face a financial crisis, do not assume that things will improve quickly. Living as though nothing has changed is the number-one mistake people make during challenging times. Instead, create a realistic plan to get you through the hard times, and determine a reasonable amount to pay your creditors each month.

Once you have a plan, mail a letter to each of your creditors explaining your situation and how you plan to repay your debt. Tell them that you are unable, not unwilling, to repay. Remember that it is always best to contact your creditors before they have to contact you.

Next, sit down with your family and discuss ways to cut costs. It is important that all members understand the situation, and the goals you're working towards. Here are six quick cost-cutting measures:

Change your routine
Dining in and avoiding convenience foods can save you a lot of money very quickly. For example, if you eat lunch out three days a week, brown bagging instead could save you $1,000 or more each year.

Be a smart shopper
Always shop with a list and take cash so that you can't overspend. Use coupons only if you planned to purchase the item anyway. Buying in bulk can save you money if you are sure you'll use the item in quantity.

Kick a habit
Save some money and accomplish one of your life goals at the same time. For example, if you smoke one pack of cigarettes each day, quitting could save you more than $100 a month.

Pay your bills on time
Late fees and over-the-limit charges can quickly add up to a debt problem. In addition, many creditors are raising rates and even closing accounts as penalties for late payments.

Evaluate insurance needs. Research your health insurance premiums and co-payments. Explore the difference in cost between using doctors in the network and those outside it. Also, consider paying other insurance premiums annually or semi-annually; the cost is usually cheaper than paying monthly.

"In addition to your personal efforts, don't be shy about seeking the help you need," said Shirley Dean, education and community relations director for CCCS. "Contact your local city offices about benefits such as unemployment pay, food vouchers and utility discount programs. You can also seek assistance from your local church or United Way."

About Consumer Credit Counseling Services
Consumer Credit Counseling Services (CCCS) is a nonprofit, full-service credit-counseling agency, providing confidential financial guidance, counseling and debt-management assistance to consumers since 1958. CCCS helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To earn more, call 800-762-2271 or visit their Web site at www.moneymanagement.org.