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
future."

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 www.cccsenespanol.org.

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Sell the Coach Bag? What I'm Willing To Give Up for Financial Security

Why doesn't she sell her coach bag or expensive bracelet? That was one reader's comment about the CNN story featuring $70K-a-year woman, who lost her job and is tapping into food banks and other forms of assistance. I featured the report in this post. Here's the comment, one reader left:

Anonymous said...

Instead of just reading the article, I decided to watched the video. And in the video, she talked about how she took off her Tiffany bracelet and left her Coach handbag in her car before hitting the food bank.

Her house is 1000% better than the place I rent. Hardwood floors everywhere. Flat screen plasma in the living room (although CNN tried to angle the camera to not capture it). Black galaxy granite kitchen counters with a giant center island. Stainless steel refrigerator. Custom ceramic appliances. Blue lighting flashing against the teapot.

Ahem ... how about selling the bracelet, selling the coach handbag, selling some of the immaculate possessions they have in their house ... before letting somebody perhaps even harder off at a food bank to pay your utility bill. Incredible.

The reader's suggestion about selling personal assets and perks prompted me to remember a past episode of Ugly Betty (season 1), in which Betty trades her expensive designer bag for high-priced medicine for her dad. The pharmacist really loves the fancy purse and Betty makes the trade. It's her practical solution to a medical care cash crunch.

Since then, I've periodically thought about what I would and would not give up when faced with a financial crisis:

Here's what I would sell:

1. Almost all of my jewelry. I actually know people who have sold trinkets and gems to raise cash. I know of one blogger, who sold a car to pay debt.

2. My violin: It was a high school graduation present from my parents. I love it, but I rarely have time to fiddle anymore. What's more, if my kids needed something very badly, I would sell the violin in a heart beat.

3. Books: With the exception of a few favorites, I would liquidate everything.

4. Clothes: Due to a few wealthy friends, I have an enviable wardrobe of high-end clothes, including a few designer pieces. Those hand-me-downs would fetch handsome prices at an upscale consignment store.

Here's where I've already cut back:

1. Yoga trainer: I share a trainer ($70 an hour) with a group of women. This arrangement cuts costs. We each pay only $10 for a session in a small class setting. However, I had also arranged for my family to have a private class with the yoga trainer. It was great for my kids: improved self-esteem, flexibility and concentration in school. But the extra $70 a week was a budget buster. We cut back to every-other week and then to once a month. And now the private family sessions have completely halted. The funds were needed elsewhere, including the emergency fund.

We still get lots of exercise and I invite the kids to work out with me by using a Yoga tape. We walk and enjoy other frugal forms of exercise.

2.Elaborate Orlando vacations: My folks live in Central Florida and we often do the Disney/Orlando theme park tour when we visit them. But we now spend fewer days in the theme parks, where tickets are now almost $56-$66, and higher per ticket. We spend more time looking for free or low-cost activities.

3. New clothes: For almost every holiday or major event, I would shop for new clothes. Now I try to avoid buying anything new, with very few exceptions.

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How Bad Is It? One Family's Slide from $70K to Handouts

How big is your emergency fund? My just-in-cast fund needs a major boost and this story from CNN has an extra message about the need for emergency funds and the importance of a diverse stream of income.

The news story features one woman's drop from a salary of $70,000 a year to the food bank line.

Here's the opening:

When she was laid off in February, Patricia Guerrero was making $70,000 a year. Weeks later, with bills piling up and in need of food for her family, this middle-class mother did something she never thought she would do: She went to a food bank.

source: CNN.com

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How to Avoid a Personal Recession: Guest Post

Cut the premium cable channels, eliminate lottery tickets and seek out a budget plan for your home utility bill. Those are a few of the money-saving tips from CCCS, which has provided this thoughtful piece about avoiding a financial meltdown in a difficult economy:

Stay employed! If you have concerns that your employer may start downsizing, update your resume now so that you are prepared. Network with other professionals and organizations in your field, and stay current on the trends in your industry. Work on increasing your credit score, as many employers use this as a variable when selecting candidates.

Save. Start, or add to an emergency fund. Having 6 months of living expenses in a savings account will ease the financial burden if you have a sudden job loss or an unexpected expense.

Pay down your debts. Start with unsecured debts, such as credit cards, medical debt and student loans. Pay off balances with the highest interest rates first. Once your unsecured debts are paid, tackle secured debts such as car loans, mortgages, and equity lines of credit.

Consider refinancing. If you have an adjustable rate mortgage and you are worried that your payments could skyrocket, refinance to a fixed rate while rates are low. Start by contacting the bank that holds your current mortgage. If you can't qualify for a fixed rate loan, work on paying down the mortgage and try to refinance at a later time.

Control spending despite rising costs. Food and gas costs are on the rise, so save money on groceries by using coupons and shopping wisely.

• Take the following steps:
  Look for buy one, get one free deals, but only on things you would normally buy.
• Compare prices and buy in bulk when it is more cost effective or when non-perishable items are on sale.
• Save on gas by planning your travel to limit driving time, carpooling to work when possible, or coordinating with neighbors to get the kids to school and share the expense.

Cut back. Reduce your daily expenses by cutting out expenses that are not necessities. You can also:

• Bring your lunch and snacks to work.
• Eliminate your land line and use just a cell phone.
• Cut out the premium channels and get back to basics when it comes to television.
• Pass on purchasing lottery tickets-that money will serve you much better in your emergency fund.
• Call all your current utility providers to make sure you are playing the lowest competitive rates for service, and ask to be placed on their budget billing plan."

Source: Consumer Credit Counseling Service

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15 Financial Strategies for Tough Times: Bankrate.com

Track your purchases and then "brutally" cut unnecessary purchases. Watch your back at work and start networking for a new job. Those are three of the 15 tips offered by Bankrate.com in the article: 15 Money Moves for Tough Times By Dana Dratch

From that list, (featured below) Tip #1 -- cutting back on nonessentials -- speaks to me. Here are a few non-essentials that have hit my chopping block:

• Bottled drinks from stores. (This includes bottled water, sports drinks and sodas). Why spend $2-3 for 16 oz. of beverage, when I can drink free tap water (filtered!) or make 64 oz of iced herbal tea for pennies per serving? When traveling on road trips, we've even started to pack our own DIY drinks and snacks, rather than pay high prices at gas stations, vending machines and convenience stores. On Monday, however, I purchased a soft drink for my daughter for $1.49. I should have saved the money.


• Make-up: With a few exceptions, I've really cutback on cosmetics and grooming products. I've started making my own day-spa facial products. It's about health and money. I've become very suspicious about the content of some of my favorite store products, including a lipstick that may contain lead. I'm checking it out. I love the long-lasting color, but I don't want to eat lead. I'm also wary of the preservatives that are found in many personal care products. Some are linked to breast cancer and other illnesses.


• Clothing: No new clothes! The clothes budget is gone, gone, gone. For special events, I will shop if needed. But it'll take a major event and a great sale to get me to spend more money on clothes.


• Junk food: I'm purging.( Saving $1,000 by Giving up Sugar) I feel better, look better and save more when I eat less junk.

Bankrate.com also stresses the importance of tutoring our kids on the difference between wants and needs. My kids, normally great about spending and saving, have been hit with recent cases of the gimmies. I backslide also. For kids and adults, it's a constant process of education and self-awareness.

Tip #4: "Safeguard your current job" offers this suggestion: "network, network, network." It's also important to stay plugged into the latest technology and trends. Also: Watch your back on the job by staying visible and productive. Work hard and document your value.

Here's the complete list with links to different sections of the full article:
1. "Eliminate the nonessentials
2. Start a go-to fund for emergencies
3. Consider cutting back (rather than cutting out) for some expenses
4. Safeguard your current job
5. Be on the lookout for your next job
6. Keep your debt load light
7. Barring a complete personal financial meltdown, continue funding your retirement
8. Swap extraneous spending for smart long-term moves
9. Investigate refinancing
10. Re-examine your insurance
11. Adjust your withholding allowance
12. Reward yourself
13. Ask for an extension on your car loan
14. Get an extension on the mortgage
15. Talk to a mortgage counselor"

A related post: My Survival Strategy: 20 Recession-Proof Ideas

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Sharon Harvey Rosenberg is the author of The Frugal Duchess of South Beach: How to Live Well and Save Money... Anywhere!, which will be published in June of 2008 by DPL Press.

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My Survival Strategy: 20 Recession-Proof Ideas

With turbulence in the financial markets and recession fears overhanging the economy, I have a game plan for dealing with difficult financial conditions. Here's how I plan to handle economic uncertainty.

1. 1. Avoid clothing stores: I recently broke down and purchased a new outfit for my son's Bar Mitzvah, but that was my first shopping trip in over year. I plan to shop on an as-needed basis only. And when I do shop, I'll avoid trendy items that look dated before I have even unpacked my shopping bag.



2. Limit restaurant meals: This is my biggest hurdle. I love eating out. But that's a trap: I get fatter and my bank account gets thinner. Eating out is not a frugal hobby or a productive recreational activity. The solution is to keep my house stocked with fun food, lots of salad fixings and other DIY treats.



3. Diversify income: It's important to have a diversified source of income. As a freelance writer, that means I need a broad mix of clients and opportunities. I might even apply for a short-term part-time job to build up my emergency fund. Bottom line: Look for new sources of income.



4. Keep learning: From graduate school to informal seminars, it's important to update my skills and knowledge, especially in the area of personal finance. I'm also working on several personal development (a-lesson-a-day) programs designed to increase my efficiency and sharpen skills.



5. Network: Former editors and co-workers remain a steady source of job leads and other income-producing tips. That network also yields other career bonuses. But beyond the meet-and-greet perks, it's just good karma to give back to others, to say "thanks" and to stay in touch.



6. Build a cushion: From saving spare change to banking a greater portion of my income, I want to increase my savings.



7. Reduce electric bill: Our electric utility bill must be cut. Our neighbor's bill is half as much as our bill. (More on this next week.)



8. Look for money leaks: Disorganization carries assorted penalties: late fees, late-registration surcharges, etc. I plan to eliminate the extra fat in our monthly charges.



9. Monitor the laundry hamper: Occasionally, my kids will use a shirt or towel --once!!!-- and then toss it into the hamper. Confession: I'm also careless about towels. The extra loads add up. We could save at least $5-$10 a week with a better approach to towels, school uniforms and I-wore-it-once tee-shirts.



10. Better maintenance: From car repairs to dental work, we could save more money through better care. With our car, a minor repair can develop into a big-ticket expense when we neglect the problem. That means more check-ups, more exercise and an increased level of mindful living.

My list also includes:

1. cheaper vacations: Better planning and a tighter budget.


2. a bare face: Do I really need to spend money on cosmetic products that just give me pimples, irritate my eyes and are made from a long list of chemicals that are possibly linked to harmful ailments?


3. better use of the calendar: I want to do a better job of planning ahead for back to school shopping and other seasonal shopping events. Note to self: Stop waiting until Hurricane Season to buy emergency supplies. Why wait until the lines are long and the prices are high?



4. the neater home: If the home is neater, we will be less likely to spend money to replace items that we can't find.



5. spend more time at the library. I spend way too much money on periodicals. And besides, it's fun to get out to the library. The branch near me has a little garden, a cafe and lots of magazines. It's like a mini-vacation.



6. local freebies: My friend Leah recently found free tickets for a stunning ballet performance. The tickets were available through our local receation center. Other opportunities are out there. I should make better use of free cultural activities.



7. rethink our coupon strategy. I am conflicted about coupons. I'm not sure if I'm using them as effectively as possible. Am I really saving money? Do I really use or need the coupons that I clip? Am I just wasting time?



8. spend less on office supplies: Buy home office staples through discounts and sales. Use both sides of paper as much as possible. Re-fill computer ink. Be green and save money.



9. peddle clothes: try to sell my discarded clothes in a consignment store.



10. relax and laugh more. It's just money. A better attitude will enhance my quality of life. Just because we're in a recession, doesn't mean that I have to be depresssed.

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Sharon Harvey Rosenberg is the author of The Frugal Duchess of South Beach: How to Live Well and Save Money... Anywhere!, which will be published in the Spring of 2008 by DPL Press.