MONEY MATTERS: “SAVY” WAYS to Manage Debt, Cut spending and Manage Your Budget

When your family loses its only income, or a significant part of it, you can feel as though it’s the end of the world. Even in families with significant assets, the sudden loss of income creates serious worries, or worse still, a real sense of panic.

While you can’t change the fact that your income has stopped, you can minimize the impact of the loss by making a conscious decision to actively manage your new financial reality. The sooner you assume a proactive stance, the sooner you’ll be able to make sound decisions, financial and otherwise, to help you regain control over your destiny.

Here are suggestions to help you better manage and control your finances while you are unemployed:

Using input from all your family members, figure out ways to cut as many extraneous expenses as possible. If you include the family in the planning process, you’ll find it much easier to gain their cooperation when it’s time to implement the plan. Obviously, you can’t cut expenses like the mortgage (unless you can refinance), but the reality is that most other expenses can be managed in a more cost-efficient manner, sometimes with surprisingly little sacrifice.

Begin by eliminating those “nice to haves” but “definitely not necessary” expenses such as frequent meals out or new clothes each season. Then, examine ways to spend less by implementing some clever cost cutting measures. Here are just a few ways to become a smarter consumer:

• Compare Health Insurance Plans: Don’t assume your company provided COBRA plan is necessarily your best option.
• Shop the Sales: Particularly during bad economic times, retailers get fairly aggressive at running special sales and promotions. Take advantage of combining sales with coupons and other special discount services.
• Credit Cards: If you can’t bring yourself to eliminate or reduce your dependency on credit cards, at least manage your cards more efficiently. If you’ve already got credit card debt, or you think you soon will, find a new card with a lower interest rate and transfer your outstanding balances immediately.
• Reduce Use of Services: Think of ways to creatively reduce your consumption of services. If your child takes weekly piano lessons, consider switching to every other week instead. If you normally bring the car in for a wash each week, consider doing it once a month instead. These small changes add up over time.
• Bank Fees: Banks are notorious for tacking on extra fees for services like checking accounts and ATM privileges. Shop around to see if you’ve got the best deal.
• Phone Bill: Now is the time to actually pay attention to all those annoying telemarketers who call trying to get you to switch your long distance service. Odds are good you can lower your calling rate with just a few well-placed inquiries. It’s also a good time to evaluate if you really need to have a “soup to nuts” cell phone plan that include more minutes or special features than you are using. If you want to be able to make long-distance calls for free, including overseas, consider using a service like Skype that you download to your computer.
• Car Insurance: Assuming you have a good driving record, you might be able to easily reduce your premiums by shopping around.
• Groceries: Shopping with a list, a full stomach, and coupons can help you significantly reduce your family’s food bill.
• Free Entertainment: From concerts in the park to movie night at the library, opportunities abound for free or low-cost entertainment options. Check your local papers for listings of options in your neighborhood.
• Use the Library: The library is one of the best bargains going. Take advantage of the books, free videos and CD’s, and research databases offered by your local library.

In addition to spending less and economizing where possible, here are some ways to keep your financial picture sound on a long-term basis:

• Decide which bills to pay first: Pay debts that are secured, such as house or car payments first. Falling behind on your mortgage will lead to late penalties and could cost you your home, so this payment should be first on your list. Don’t let your payment decisions be dictated by which collection agency yells loudest.
• Be judicious about cutting household help: Particularly in the arena of childcare, you don’t want to eliminate your support system, only to have to scramble madly to replace them in a few months. If you can’t afford to continue full-time help, speak with friends who might be interested in hiring your sitter or housekeeper on a temporary basis, while you only use them on a part-time basis.
• Keep perspective when checking your investments: Given the volatility of the stock market, your portfolio will go through ups and downs. Don’t get in the habit of checking your portfolio on a daily basis – you’ll suffer needless worry and anxiety.
• Don’t raid your 401(k): It’s tempting when you lose a job to withdraw money from your 401(k) or retirement plan. If at all possible, don’t do it. Distributions from your qualified retirement plans are subject to income taxes and a 10% penalty. More importantly, the money you take out won’t have the chance to grow and help provide for a secure retirement.
• Take advantage of discount cards: If you have a high school or college student in the house, they can purchase a student advantage discount card and receive significant savings on everything from movie tickets to Amtrak travel to purchases at Target.com.