Managing Money During Tough Times

The events of the past few months have caused a lot of worry including concern for our financial future. If you lost your job or need help with food, review this list of resources to help you.

To manage my fears about our family finances, I remind myself of the lessons I learned during another tumultuous time in my life. In 1998 we lived in Augusta, Kansas when it flooded. Water filled our basement and rose a foot onto our main floor. We had to move out and rent an apartment while making the needed repairs. For several months, we paid both a mortgage and rent while replacing our home's structures and belongings. Although we secured monetary help from family and agencies, it took years to recover our financial footing.

Changing Our Attitudes About Money

After we had returned to our home, we returned to pretty much the way we had lived before. When we felt that we needed something, we bought it, often using a credit card. If we wanted to spend a long weekend at a theme park, we put those expenses on cards as well, and our balances climbed.

In The Debt-Free Spending Plan JoAnneh Nagler shares an interesting piece of history. She writes about the 1980s, when ATMs first appeared and only a few businesses took credit cards. Folks could not buy groceries with credit cards back then. Now we can and we can also run up cash advances with them, and pay mortgages with them. We can extend our income beyond its reasonable reach.

Carrie Rocha warns against judging the affordability of a purchase by whether or not we can make the monthly payment in her book Pocket Your Dollars. Mary Hunt advises in Debt-Proof Living that we do not purchase expensive items, such as computers, on credit cards. They will likely become obsolete long before we pay down debt.

After the flood, if my husband and I had needed to sit down with a bank loan officer to get approval for our purchases or trips, we'd have made different choices. We could have saved to pay cash for needed purchases, and we could have planned fun, cheap activities in town. That's the way we are handling our finances now, and our debt pile is diminishing.

Staying Motivated

If you've built up a good amount of debt, as we had, it takes a considered effort to pay it down. Most books about debt reduction include sections on motivation. If we pinpoint a solid and specific reason why we want to pay down debt, we can focus on that when the sacrifices feel overwhelming. In The Total Money Makeover Dave Ramsey says that people who have a focused intensity are more likely to successfully get out of debt.

It can't hurt to build an arsenal of strategies and motivations. Rocha discusses minimizing the possibility of sabotaging goals: use direct deposit and cut up credit cards. I chart my debt reduction process with pen and paper, and it is gratifying to note the reducing debt amount. Other people track progress by using large, visual charts, which they prominently display.

Developing and Following a Budget

David Bach gave my favorite piece of advice as the title of his fourth chapter in Debt Free for Life: "If you're in a hole, stop digging." Most of the books offer plans for doing just that, and most suggest we start by taking a hard look at the state of our finances. Nagler lays out a process for determining income and expenses, and then designing a budget. Ramsey's plan includes listing bills from smallest to largest and then attacking each bill, in order, with as much as your budget can spare until it is gone. Both Ramsey and Nagler offer advice for finding enough money to pay the bills and begin saving. Bach explains how to negotiate with credit card companies to get better rates.

These are tough times in many ways. After that flood, however, I learned that the primary cause for our building debt was not that we had to rebuild, but that we developed bad spending habits that went unchecked for a long time. It feels good, now, knowing how we spend is one thing we can control.