About Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service. He is also a professional speaker, freelance writer, and entrepreneur.
Know Your Money
Tuesday – March 11, 2014
What Happens When The Budget Comes Under Attack?
By Donell Edwards
Before getting into today’s post I want to acknowledge that there is a diverse group of readers of our Know Your Money Blog. Some have the financial acumen to be very successful in managing their money and read our blog merely because it interests them. Others, although affluent, understand that the cliché, knowledge is power, is more than just a cliché, there is a great deal of truth in those words. So they seek as much knowledge and information as they can get to be well informed on how to improve their financial skills. Then there are those who are on a financial level where they feel stuck and would like to improve their financial situation. And then there are others who are in real trouble financially and who are struggling just to get by from day-to-day.
I would like to say to those in the latter group, those who are struggling to get by, that I understand. I can fully relate. I know that if you have read our posts in the past there were probably times when you said this is meaningless to me because I don’t know how I will be able to get by from one day to another. So how on earth am I supposed to have a budget? I stay constantly behind on practically everything. It is all that I can do to pay the mortgage or rent and the utilities. Every day I drive an automobile that I hope will not quit before I go all the places I need to go. I have to scrounge to find gas money. And I am in almost constant fear of the consequences of an accident because I can’t afford auto insurance. There are even times when there is not enough food in the household. When I get a bill paid it seems like it is due again the instant it gets paid. I am very fearful of the consequences of anyone in the family getting sick because I don’t know what I would do. We are too poor to die, I would not be able to bury my deceased loved ones. But some might reason, aren’t there social programs to help people with these kinds of needs. Yes, but many people, while not having enough income for a normal life, exceed the income requirements for public assistance. They are on their own. I know. I have been there. I have experienced some of the same things myself.
I know that for some reading this, you may have a very difficult time understanding how anyone could get into this situation. If you have not experienced it yourself and you have had a fairly easy ride, you probably cannot imagine anyone being in such a dire situation. Nonetheless, this is the reality for many people. That is why it is so important to me to try to offer the help my neighbors in this condition need by sharing my experiences and knowledge through the information in our blog.
Today’s blog post is about what to do when the budget comes under attack. That is why I wanted to acknowledge those who feel that a budget is not practical under their circumstances before embarking on today’s post, and to emphasize that everyone needs a budget. We will discuss how to prepare a budget under distress in another post. That being said, regardless of what financial level you are on, what can you do when the budget comes under attack? When you have prepared a realistic budget and the unexpected happens, how can you effectively respond?
First of all, let us consider some of the areas in which the budget may come under attack:
- Reduction in hours
- Birth of a child
- Death of a mate
- Caring for ageing parents
- Long-term illness
- Auto accident
- Everything else
It is very easy to become complacent when things are going well and the budget works the way we planned, but when any of the events listed above occur unexpectedly, or other things happen that attack the budget, we must always have a backup plan. The best backup plan is an emergency fund, however, as we have previously stated numerous times, this is a process, and we have not gotten that far along in the process yet. The emergency fund is something that we will discuss in the future.
However, where we are now in the process is evaluating and monitoring spending, developing a realistic, workable budget, and adhering rigidly to that budget. So after having accomplished those tasks at this point in the process, when there is no emergency fund, how do we handle the attack on the budget?
First of all, it must be determined if the factors affecting the budget are long-term or short-term and plan to adjust the budget accordingly. A short-term impact of only a few weeks or a few months is far different than an impact of a year or longer. Whatever the situation, we must determine how to adjust the budget to allow for the additional expenses incurred as a result of the event or events that have occurred. This means reducing payments where possible, eliminating items that can be eliminated, and contacting creditors and explaining the changed financial circumstances and where possible negotiating more affordable payment terms. That is why it is so important to always pay bills, pay them on time, or early if possible, and to always try to pay more than the minimum amount due. It is much more likely that a creditor will work with you in a crisis if you have established a good payment history and have developed a good relationship with them.
So, adjusting the budget is the first step. If adjusting the budget does not eliminate the problem then other measures are necessary. You will have to determine what measures will work best for you, but be prepared to make sacrifices. It may be necessary to take a second job for a time. If you own any valuables and the unexpected expense may be eliminated by selling valuables, that is an option. For example, if you have jewelry, antiques, collectables, stocks, etc. that would bring in enough to pay the expense that is an option.
For those who do not have valuables that can be sold or assets that may be liquidated, finding items in the budget with the highest payment amounts that can be eliminated is another option. Remember, depending on the amount of the expense and the length, it may be necessary to make some very undesirable sacrifices. For instance, if you have a high vehicle payment and public transportation is available, an option for you may be to place an ad in the newspaper or online for someone to take over the payments on your vehicle. Or if you lease your home or apartment, consider moving to a home or apartment that is less expensive if the expense incurred is of a significant enough amount and for a long enough period of time. These are very drastic measures, but they may be very necessary to get back on track with the budget.
Start today working on your backup plan; don’t wait for a crisis to happen. Consider what you would do if some of the things listed above happened to you, consider how your budget would be affected, what measures you would need to take in order to adjust your budget. Although the emergency fund is later in the process, if you are on a course with your budget where you have or will have money left over each month, save as much as you can. That will definitely help in the case of unexpected events that attack your budget.
We welcome your comments and suggestions on how to overcome unexpected expenses that strain the budget. Just submit your comments at the end of this post.
Be sure to come back tomorrow for guest contributor Felicia Johnson and her post, “Making Change.”
By the way, I found the following video very interesting. It discusses the negative affects of materialism on life and society. This is very relevant to our discussion on money management and spending, because too often one of the root causes of poor money management is a materialistic lifestyle. What is materialism? The Merriam-Webster dictionary defines materialism as, “a preoccupation with or stress upon material rather than intellectual or spiritual things.” The video really should cause each of us to pause and consider how we are living our lives. I hope you enjoy it.
Are You A Spendaholic? Share Your Experience
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The High Price of Materialism
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