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Financial Common Sense: Are You One Unexpected Expense Away From Ruin?

Updated on November 8, 2017
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April Savage is a Business Advocate, Personal Banker & Author; advocating Literacy, Entrepreneurship & Financial Planning by Empowering

A lot of families are one unexpected financial burden away from catastrophe.
A lot of families are one unexpected financial burden away from catastrophe. | Source

It's Friday! It's payday!

It's time to plan a family outing and eat out and maybe do some shopping. For a typical family of four, eating out would start at around sixty bucks and go up from there. Then let's make sure the kids have new I Phone's, electronic gadgets...by the way we just put that expensive stuff on our Best Buy credit card and make payments all year long. You know, the minimum payments. Those minimum payments cost an annual percentage rate of only 24.9%. And when you are late with that minimum credit card payment you get finance charges and a late fee of $35.00. Wow. (Depending on what you drive, that $35 bucks is a tank of gas).

Let's not forget about Christmas! We all know all year long when Christmas is but yet push the brink of financial oblivion weeks before to make sure everyone has gifts under the tree. Oh, credit cards cover most of that too. Hey, we can push our auto payments or mortgages to next month and buy Christmas! We are assaulted months before it begins with media propaganda, in our face advertising and enticing so-called sales to reel us in like fish on hooks.

It's a startling statistic that over half of American households are not financially prepared if a sudden unexpected expense came throttling through their front door. You may just be one unexpected emergency away from homelessness or bankruptcy and not even realize it.

I worked in a Mortgage Collection center for over a year. I heard all the excuses. I saw patterns with people. I still see patterns with people in banking.

One I will never forget is a mortgage three payments behind ( by the way, that is foreclosure status for the bank I work for) and I called to see what was going on, if they could make a payment to prevent foreclosure. His reply: "I took my family on a much needed vacation, we used the mortgage payment for that. I will make a payment next month."

Next month, he was in pre-foreclosure and desperate to work with our loan modification department. I don't know if he was able to save his home. I was horrified to see people actually stooping that low with their finances and gambling on the verge of homelessness just to have a couple weeks of fun. Wow those kids will remember that vacation!

I guess the family vacation took precedence over having a roof over their heads? Apparently that customer wasn't and will not be the only one. I work in Banking now, and I shake my head and think: "What are people thinking?"

In my years of being a credit manager, then Mortgage collections, and now a Business Advocate in Banking, I can honestly say most people are not thinking. They are not preparing for the future. They don't think "what if?"

What if your spouse passes away suddenly? Do you have life insurance to pay off your mortgage or to even buy a home outright if you are renting? Most people would not be able to afford a funeral because they don't have life insurance. Could you pay all the bills and save money without a second income? What if you suddenly lose your job, or the company you built has to fold, and now you risk bankruptcy.

I heard this my whole life: "Just give it to God, he will make a way."

Great! Let's give it all to God, but let's not be lazy and actually do something about our finances too! Let's really look at the "what-if's"

You know the people who make it when sudden woes hit? The ones who have money in liquid assets in a savings account. The ones who have little or no debt. I've seen first hand that with no debt, you get further ahead and save more. However, that applies if you are frugal and living beneath your means. Meaning, just because it's pay day doesn't mean take the family out and blow one hundred bucks. Frugal people may plan a night out, but they also mostly eat in and save the money. Hey my family and I have made many an awesome memory around the dinner table too.

I read an article that a typical American family household has over $16,000 in credit cards alone. That doesn't include vehicle payments. And if you rent, depending on where you live, the cost of living is ridiculous and you could be shelling out over $2000.00 a month for a rental. Typical mortgages in my area are $250,000.00 and up in the millions.

Then you have some areas of the country that are rural and perhaps rent is much less, but so are wages. I see wages not keeping up with inflation, rent, or the cost of basic living necessities such as food and gas. In this current economic American society we live in, being in debt is not a good thing. Being in debt is a way to lose it all super fast with no way to recoup the losses.

So what do you do if you are struggling to make ends meet? What if you have tried everything and cannot increase your income right now? What if you can't move to where the money is even to start over? What if you are stuck in a pit of financial hopelessness with no end in sight?

Well let me tell you, no great city was ever built in one day. Everything worth doing for a better future takes time, hard work and perseverance.

Read below for the three steps to start taking to turn your finances around and give you hope:

Source

The First Step

I wrote above about some of the financial horrors I have seen in Mortgage collections, finance and now banking. That doesn't cover the tip of the iceberg.

But I haven't told you why I feel this way about debt. And sometimes it takes making a courageous, honest assessment of how you really feel to see why you are in the shape you are in.

Before I had children, I had amassed credit card debt. All of them maxed out. One of them was a Discover card with a $15,0000.00 line of credit. It's easy to get a credit card if you have a high credit score, regardless of your income. I learned that fast and easy. I was also young and stupid.

I also learned that credit cards sell you: bonus points, cash back incentives and gift cards. All you have to do is keep using that credit card. In reality, you don't earn anything. You pay for it every time you use that card, but their marketing is so enticing people believe they actually get something for nothing. That is never true.

My husband at that time had suddenly lost a job, then went on unemployment. So I took a second job, and he found a sales job then a full time job weeks later. Unfortunately, because we had accrued so much debt, even though we were both working four jobs between the both of us, we were still financially drowning.

You read that right. We had two jobs a piece. We were not making ends meet. To make matters worse, it was in the middle of Winter which is expensive too. Higher heat bills, higher gas bills, etc. Nightmare.

What happened? You may be thinking.

Well, the inevitable happened. Instead of working together on a budget and stop spending unnecessarily, we filed for Chapter 7 bankruptcy. About four years later, we filed for divorce. Even though he was unfaithful, there were habits already in place that were not honestly looked at.

The truth is, if you aren't willing to sit down and work together then it will never work. The first step to breathing fresh air instead of drowning financially is being honest with yourself. It wasn't until I had become a single mother of two, that I learned the value of being debt free. Through five years of being a single parent, I started a business, worked full time and bought and paid for two vehicles on my own.

It would have been great to make more money at that time. But in reality, most people aren't living frugal and instead live over their means with everything. My dad broke finances down to me with this example: "You go to a mall and see a dress you want, it is $60.00." If you are making $8.00 an hour, how many hours are you really working to pay for that $60.00 dress?"

Guess what, you are working over seven hours to pay for that! Is it worth it? Once he broke it down for me, I had no problem and still don't with shopping second hand stores for name brand clothing.

Are you blowing money? Is your partner doing something he/she should not be doing that is financially hurting the household? How much are you really working to pay for that night out with the family? Or drinks at the bar?

The first step is being honest.

Once you are honest about what you are doing with your hard earned money, then you can write down the income you have coming in and the bills you must pay every month. If there isn't enough money to pay all the bills, then see about increasing your income or selling something. If you can't increase your income or sell anything, then can you cut out a bill altogether?

Listen I talked to a customer in Mortgage collections that was spending over $200 a month on cable television! He was almost 30 days late with his mortgage every month, but he liked his cable. Did you know you can get Netflix for $10.00 a month? Most people have the internet, so if you have that you can get $10.00 television instead of a high cable bill. And believe it or not, you don't have to spend a fortune on internet either. Ours is $30.00 a month, and yes we only have Netflix!

What bills can you lower? What about your electric bill? Are you wasting electricity and leaving lights on? What about your insurance? You can actually talk to them about lowering the bill. And can you make coffee to take to work instead of buying it? There are tons of ways to stop spending money and start living frugal.

The Next Step

Step two is writing down everything your spending money on and seeing if you can lower those bills.

The Final Step

The final step is being courageous.

Do you need to make a change geographically? My husband and I did this. Best choice we ever made. Sometimes you see you may be living in an area that isn't offering financial opportunities or hope for your future. No jobs. Long drives to get to anywhere. We were there. When we sold everything we could, and cut out all extra spending, we realized it still wasn't enough. We had to move.

My husband took a job out of state, and we took the last bit of money for that month we had left to get an apartment. We were left with no choice. With no job opportunities, and long drives to get anywhere, we realized if we didn't get out we would die financially. Four years later, and we both have steady careers, and saving money, living frugally and on the path to paying debts off to clear our credit.

Is it perfect? No. Is it hard? Yes. But it is worth it. There is something liberating about taking steps to be rid of burden. Most all marriages end up in divorce because of financial hardships. Health issues become the norm because of financial strain. It's much better to make sacrifices now and make changes that will benefit you and your family in the future, instead of staying trapped in a money pit game where you drown. Not only you, but your children. If you don't make a change, and be honest, what can you help your children with when they need it?

I was there. It was hard. My family has been through so much financially. But we took tiny steps, and now breathing easier and making goals for the future. Not just for us, but for our children too.

You can do it too. Be honest. Write everything down so you see what is really going on. Then be courageous.

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