Monday, October 13, 2008

CCCS: How to Survive the Economic Storm

This piece from Consumer Credit Counseling Service is excellent:

"As the debate goes on as to whether or not we are in a recession, most consumers agree that they are feeling the impact of our current economic conditions. As the number of available jobs diminishes and the number of foreclosures skyrockets, families are looking for ways to reduce spending and increase income just to make ends meet.

"No one is immune to the effects of this financial crisis," said Jessica Cecere, president of Consumer Credit Counseling Serviceof Palm BeachCounty and the Treasure Coast (CCCS). "What we can all do is take simple steps to minimize the impact and prepare ourselves for the

CCCS offers tips to help consumers weather the storm and survive the turbulent economic times ahead.

  • Expect changes in lending standards The days of "no money down" and "zero percent interest rates" are probably behind us. Consumers with questionable credit histories will find it more difficult to borrow money. Some other changes we can expect:
    Borrowers will need to demonstrate an ability to repay the money borrowed;
    *Job histories of five years or more in the same company or industry may become standard requirements for borrowing money;
    *Credit scores will be more closely scrutinized by lenders;
    *Larger down payments may be required for major purchases for things like cars and homes
    *Banks may require collateral from borrowers-something they can use to recoup their money if the borrower defaults.
  • Prepare for increasing prices While current market conditions may have had a positive impact on fuel prices, paying at the pump is still taking a major hit on most budgets. The average family budget has not been prepared to absorb the rising cost of groceries, higher utility bills, and climbing insurance premiums and health care costs.
  • Make adjustments By making small changes, such as substituting store brand products for the higher-priced name brands, increasing (or lowering) the thermostats in your house just a couple of degrees, or participating in a car pool to get the kids to school, you can save significantly. Look for things you can cut out of your budget-even small savings can add up quickly.
  • Keep some cash on hand Separate from your emergency fund, it is always a good idea to have a small amount of cash on hand for emergencies. You may even be able to use cash to save money, as some gasoline stations offer a discounted price for customers paying cash. In addition to cash on hand, you should have, or work toward, having 6 months of living expenses in a savings account that you can access quickly if you need it. If you have large amounts of cash in savings, make sure you understand FDIC guidelines so that your money is safe. Getting credit will be more difficult. If you currently have home equity lines of credit or credit cards, you may find that limits are lowered or unused accounts are closed because creditors want to minimize their chance of loss.
  • Know you are not alone Many consumers are struggling to make their mortgage or rent payment, buy groceries and gasoline, and make the minimum payments on credit card bills. Your friends, neighbors and family are all feeling the effects. While you may not be able to address every challenge immediately, take active steps to improve your financial outlook wherever you can.
  • Remain calm and be patient If you had your heart set on a new car or a luxury vacation, you may need to put those plans on hold. Resist the urge to buy things with credit and wait until you have saved enough money before making purchases. If you have been saving for a specific item, now might be a great time to make a purchase, as many retailers are reducing prices in order to stimulate sales.
  • Live by basic money management principles Practicing sound financial management is always a good idea, and it can ease the burden when times get tough. A few key things to consider:
    *Spend less than you earn.
    *Have an emergency fund that covers six months of living expenses in an account you can access if you need it.
    *Pay off and stop using your credit cards.
  • Be prepared for the unexpected - have in place the following:

Insurance - to protect your home and other large assets.-

Savings - to cope with a loss of income until you can replace those dollars.-

Employment - Keep your resume up to date. You can't always plan for a job loss, and good preparation will help make the search for a new job easier.-

Retirement - Contribute to your financial future, even if it is just a few dollars per pay period.- A Will - protect your loved ones

Health care - If at all possible, ensure that you have medical coverage for yourself and your family at all times."

source: www.cccsinc.orgor


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