When you have financial difficulties it’s something that is a 24-hours-a-day, 7-days-a-week, 365-days-a-year stress marathon. Right now, there are a lot of people who are in, heading into or slowly climbing out of what may be the most difficult financial time of their lives.
Some people purchased houses they can no longer afford because of adjustable rate mortgages or home values dropping. Others have lost their jobs or have been facing difficult life circumstances such as divorce or a death in the family. Sometimes a house that was once easily affordable suddenly becomes impossible due to circumstances that you didn’t see coming, or are beyond your control.
Whatever the reason you find yourself in a difficult financial time, if you’re like a lot of people right now, you have been doing everything you can just to keep your bills paid. Once your mortgage is paid, you may even have to choose which of your other bills get paid each month. You have gone without things that you never imagined you would ever have to go without. You’ve had to take your kids out of after school activities and have been able to give birthday and holiday presents only by a combination of hard work and luck. You’ve scrimped, saved, cut your budget to the bone, sold things and somehow every month you’ve made it. You’ve become an expert in sales, budgets and determining the difference between a want and a true need.
It may have taken a while to happen, but slowly things have gotten better. You or your spouse may have been able to find a second job. You may have gotten a raise, a promotion or even found a better-paying primary job.
Now for the first time in months or even years, you don’t have to obsess about every penny that goes into or out of your checking account. You don’t have to sit down with a calculator to figure out whether it would be cheaper to buy groceries at a higher price in your neighborhood or if you can afford the gas to buy cheaper groceries at the warehouse club in the next town over. You don’t have to tell your kids there’s no money for the things they need much less the things they want.
When you work so hard for so long just to keep your head above water and life finally takes a good turn, there can be a big temptation to just collapse and let the money flow all over the place. It can be such a relief to not have to worry about money every minute of the day that if you’re not careful, you may overcompensate and begin to overspend.
Rather than risk your new financial position, the first thing you should do when your finances begin to look up is to immediately write up a new budget. Once you know how much disposable income you’re working with, sit down with your spouse and decide on a reasonable budget for extras for yourselves and for your kids. Rather than just blow the money, make specific decisions about what will be bought and where the money will go. Although you shouldn’t spend your money frivolously, you do need to spend some of it on the things you’ve had to go without.
Put some of the remainder toward an emergency fund that you can use if you ever face financial difficulties again. Most experts recommend working toward an emergency fund of six months worth of expenses. If you have any debts or liens, work toward paying those off as quickly as you can.
As difficult as financial hardship is, if you keep the lessons that you have learned from your experience, it will make you a stronger financial planner for your family in the long run.