Content Overview
- Summary
- Step 1. Create a Net Worth Statement and a Cash Flow Statement.
- Step 2. Examine your income
- Step 3. Examine your expenses.
- Step 4. If after eliminating your non-essential expenses, you still have more outlay than income, prioritize your debts.
- Step 5. Create a payment plan for your unsecured debt.
- Step 6. Renegotiate as much of your debt as you can according to your plan
- Step 7. If you still have a short fall, look for money including from loans against assets. Consider bartering
- Step 8. As a last resort, sell assets - perhaps even your residence.
- Step 9. If you need help through these steps, consult with a professional.
- Step 10. If nothing else works, consider starting a bankruptcy proceeding.
Ten Steps To Consider In The Event Of A Financial Crunch Or Crisis
Step 3. Examine your expenses.
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- Check your medical expenditures to see if they can be decreased or if there is money you are leaving on the table. For instance:
- If you have health insurance, that you are maximizing use of it. See How To Maximize Use Of Your Health Insurance.
- If you do not have insurance, that you are getting the care you need at the least cost. See: Uninsured.
- That you are minimizing your health care expenses. For instance, see:
- Drugs: How To Save Money When Buying Or Using
- Health Care: How To Save Money
- How To Negotiate A Doctor's Bill
- How To Negotiate For A Lower Health Care Bill
- How To Save Money In A Hospital
- Medical Bills: How To Save Money (after receiving a medical bill)
- Medical Tourism (saving money by traveling to get medical care)
- Tax Advantaged Health Savings Plans (including getting money out of)
- Check to see if you are leaving money on the table. For instance, see: Financial Assistance Check to see if you qualify for government benefits at www.benefits.gov
- Explore whether you can consolidate all or most of your debt into one loan, including switching credit card debt to a card with no or low interest. Consolidation can lower the amount of interest you pay on outstanding debt. (How To Consolidate Your Debt)
- Create a budget to help keep spending in line.
- The perspective you can gain just from creating a budget usually makes the process worthwhile.
- If you use it to help guide future spending, all the better.
- To learn how to create a budget, see: Budget: Creating/Living With
- Divide your expenses according to their importance:
- Essential -- Core expenses
- Discretionary expenses
- Unnecessary
- Starting with the most unnecessary expenses first, eliminate expenses you don't need in your life.
- Start with your largest expenses, particularly those that happen all the time. For example, check your property and casualty insurance policies such as your Homeowners/Renters and Automobile policies. There may be some that you don't need, or that you can reduce the premium by doing such things as increasing the deductible.
- If you need a medical procedure and will have to pay a substantial amount of money yourself, consider having it outside the U.S. in an accredited hospital. Going outside the U.S. for medical care is known as "Medical Tourism." (We have extensive information about "Medical Tourism").
- As you have time, work your way down to your smaller expenses. A daily latte at $5.00, 5 days a week for 52 weeks adds up to $1,300 per year.
- It's important to keep a few "luxuries" in your life that make you feel good. Just figure out how to do them less expensively. For example, instead of eating out three nights a week, eat out once -- or at a less expensive restaurant.
Look at your taxes. Perhaps there are deductions or other means of reducing your taxes that you are missing. Reducing taxes by $1.00 is even better than earning $1.00. For information see: Taxes.
If you are part of an economic unit, think in terms of the entire unit. Get everyone together and discuss what everyone can do on their own to relieve your financial pressure.
- Look independently at their expenses to see if you can come up with ideas of your own.
- Create ground rules for your economic unit -- such as who spend how much on what. Agree not to question what the person spends so long as within their budgeted amount. If everyone knows their job, it will relieve tensions.
- If you need someone to assist you for a while, instead of hiring expensive help, could a family member take advantage of an FMLA leave to care for you? The person may lose income, so do the math.
Consider:
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