In periods of economic decline many people find themselves squeezed from both sides – facing both rising prices and a loss of income. With constant media reports on how the economy is heading towards a recession you may be worried about how you are going to pay your own bills. While you may not have control over the economy you do have control over the actions that you take to prepare for possible financial difficulty.

Rising prices
With gasoline prices hitting record highs, everyone who drives a car has been affected by rising prices. Changing driving habits could save you hundreds of dollars a year. Consider if you can take public transportation to work or carpool, even if it is only once or twice a week. (If you cannot find anyone to carpool with at your job you still may be able to carpool. Many cities have set up carpool programs. Call Information or check your city’s website to see if this is a service that is offered in your community.) If you cannot carpool to work see if you can carpool with a neighbor to run errands, such as going to the supermarket. If not, try to run errands after work, as opposed to making multiple trips. For places that are close to home walk or ride a bike, instead of driving a car.

Gasoline is not the only price that is rising. You may find that you are paying more for such things as clothing and food. (Overall, in 2007, inflation increased prices by 4.1%, in part because companies are facing their own rising gas costs, and also the declining value of the dollar has increased the cost of imported goods.) It is always a good idea to shop with a list when at the supermarket, to prevent impulse buys. Try avoiding such things as organic foods (which, while good for the environment, usually cost more), desserts, frozen foods (which are often more costly than purchasing fresh ingredients), and expensive meats and cheeses. Consider also if you can get food anywhere else cheaper, like a bulk store, discount supermarket, or farmer’s market. Avoid purchasing food at expensive, gourmet stores. Whatever it is that you are buying, you will save money by purchasing goods on sale. If you are finding it hard to cut back on essential costs, like grocery purchases and gasoline, try cutting back on spending that is more discretionary, like dining out and snack purchases. For example, if you purchase a cup of coffee at $2 every workday, you would save $43 a month by cutting it out!

Declining wages
Many people find themselves in a position where the overtime they were previously given or their regular hours are cut at the same time they are struggling to pay higher bills. If your hours have been reduced try searching for a part-time job. Even though often you will make less money at a part-time job than by working extra hours at your primary job (since you will not get overtime pay, and part-time jobs are often in the service sector) it is a way to bring in extra money until, hopefully, in the future you will be able to work extra hours again at your primary job.

You may be not just worried about your hours being cut, but losing your job altogether. Focus on doing the best job that you can to show your employer that you are a valuable employee. If you think that you are in serious risk of being laid off, updating your resume and references will make you more prepared to start a job search if you do lose your job. At the same time, if you do not need to, avoid starting a new job, which can provide less security because if there are layoffs a company usually starts with its newest employees. Furthermore, avoid taking on expensive obligations that you will not be able to pay if you lose your job, like purchasing a house or new car.

Self-employed people and people that get paid on commission often struggle the most during a sluggish economy, since their income is completely dependent on the business that they do. If your income varies make sure to put aside money during the months you do well to help you pay for expenses during the months that you do not do as well. If you are self-employed and struggling try to seek out help to improve your business. For example, your local Chamber of Commerce or trade organization may offer events where you can get advice and talk to people with experience that can help you. Ultimately, if your business is not profitable consider closing it or scaling back, to find a job with an employer. Likewise, if you get paid on commission and are just not earning much money consider looking for part-time job to provide a steady source of income each month or a non-commission job.

Slow housing market
If you own a home and anticipate financial difficulties selling your house can be a great way to improve your financial situation. It provides an opportunity to lower your housing costs by renting instead of purchasing another home (usually it is cheaper to rent) and use the equity in your house to pay off whatever debts you have. Unfortunately, sales of existing homes in 2007 saw its biggest decline in twenty-five years. However, if you are interested in selling your home this does not mean that you should not try. Your house will definitely not sell if it is not on the market! Prepare your house the best you can (such as by cleaning, painting your walls neutral colors, and removing personal items, like family photographs) to increase the likelihood of a sale.

If you cannot sell your house and have a spare bedroom consider renting it out. Renting out a room is a great way to increase income with little extra effort on your part. You may nervous about letting a stranger into your home (if you have a friend or family member looking for a room it could be ideal to rent to him or her), but by requiring prospective renters to bring their credit reports and provide references you can minimize the likelihood that you rent to someone who will cause you difficulties in the future.

Paying bills
Despite your best efforts to make changes you may find yourself in a position where you do not have the funds to pay your bills. The first step that you should take is to prioritize your bills and make sure that the important expenses are paid first. You would not want to pay your credit cards before you pay your rent or your mortgage. Next, for any bill that you cannot pay contact the creditor and explain to them your hardship. If they know you are struggling they may be willing to allow to you miss a few payments or make lower payments for a few months. Even if you cannot work out an agreement you can still try to send them a small amount to demonstrate that you are still interested in paying. If needed, seek the help of a professional. A certified credit counselor at Consumer Credit Counseling Service of San Francisco can go over your budget, discuss possible adjustments you can make, and talk about options for debt repayment. If you are interested in talking to a counselor call us at 800-777-7526, Monday – Friday 8:00 AM to 5:00 PM PST..

Getting stressed
When you are concerned about paying your bills or losing your job it easy to become stressed and worried. While you want to take positive action to improve your financial situation worrying too much does not accomplish anything. If you feel overwhelmed focus on the positive parts of your life – such as friends, family, pets, or hobbies. The economy is always changing. Today’s bust will be replaced by tomorrow’s boom. When your situation improves remember to put money aside in savings, so that if you face challenges in the future it will be easier next time.
1. Try bringing your lunch to work every day instead of purchasing it. Food is almost always cheaper at a supermarket than a restaurant.

2. Separate wants from needs. Do you really need that 42 inch flat screen television? When money is tight it should not be spent unless absolutely necessary.

3. If you need to buy a car buy one with a higher MPG (miles per gallon). Let’s say you have a choice between a 30 MPG car and a 15 MPG. You drive 150 miles a week and gas is currently $3.25 a gallon. Choosing the 30 MPG car would save you $72 a month!

4. Keep track of your spending. If you know where you money is going it will be easier to make changes if you need to.

5. Avoid using credit to pay your bills. While it may make things easier now, using credit only increases your monthly payments in the future.

6. If you have a direct deposit for your paycheck have some of your paycheck directly deposited into your savings account. If you do not have a direct deposit set up an automatic transfer each month from your checking account to your savings account. It is easier to save if you make it an automatic process.

7. Avoid spending a significant amount of money on periodic purchases, like gifts and vacation. While you may feel good while you are spending the money, you will probably be wishing you had the money back later.

8. Cut or downgrade your services. Can you get a cheaper cable package or have no cable at all? If you have a cell-phone consider cutting your land-line.

9. Instead of purchasing a book or magazine or renting a video go the library. It’s free!

10.Try lowering your energy bill. Turn off appliances and lights when they are not needed. Purchase energy-efficient light-bulbs. When you can, try using a fan instead of air-conditioning and putting on a sweater instead of turning on the heat.

America’s Cheapest Family Gets You Right on the Money: Your Guide to Living Better, Spending Less, and Cashing in on Your Dreams
By Steve and Annette Economides (Three Rivers Press, 2007)

If you have been avoiding financial self-help books because you are worried they are too boring or technical this is the book for you. The authors have no financial background but do have life experience. They are a regular husband and wife team with five children, and in this book they share the knowledge they have gained after several years of paying their bills on a limited income. The book is easy and enjoyable to read. The Economides give multiple specific personal examples of what they have done in the past and how they have helped their friends make changes as well. The topics that they discuss include how to cut back on groceries purchases, how to budget, how to buy cars without financing, how to save for a home purchase and do affordable renovations, ways to lower your utility costs, how to pay off your debt as soon as possible, how to deal with medical expenses, ways to cut back on clothing, entertainment, and vacation, how to raise money-savvy children, how to save and invest, and how to have a positive attitude. In addition to describing their own situation the Economides offer several specific tips on what you can do to improve your situation, based on to what extent you feel comfortable making changes. After reading this book you should feel more empowered and confident to face your own finances and make changes in your life.

Copyright © 2008 CCCS
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