Adjusting to Suddenly Reduced Income
Reassessing How the Money Will Be Used
Expectations About Change
Willingness to change occurs gradually and does not come at the same time for everyone. People tend to want to keep everything the same as it has always been. For some people change is so scary that they pretend that they don't need to make any changes and can continue to live as they always have.
Most people do not make immediate spending changes to compensate for an income loss. These changes usually take several months and often occur at crisis points. People who more quickly change their spending or consider different options are usually more satisfied with the adjustments they need to make. Some people take longer to get through the spending reduction steps because they get temporarily stuck in different stages of the grief cycle. Figure 3 shows the difference between changes in income and spending.
Figure 3. Comparison of Income and Spending Decreases
Examining Your Spending Patterns
"The whole family needs to talk about the necessary spending changes, because these decisions affect all members."
It is important to take action quickly to adjust excess spending. The whole family, including children, needs to talk about the necessary spending changes, because these decisions affect all members. When children are not included in this planning and discussion, they may develop unrealistic fears. They may think that they are somehow bad or the cause of a problem that they sense, but that has been kept a secret from them. If family members understand and have a voice in the tough choices that must be made, they will be more willing to follow through on them. Family members can help each other stick to these decisions.
Management of money can be relaxed when money is plentiful. When money is scarce, however, careful management is necessary to get the most from the money you have. Members of the household need to develop or readjust a spending plan to make it easier to pay bills. If your family has not kept close tabs on its spending patterns, they will have to figure out how much they have been spending on various categories of expenses before completing Worksheet 1. If your family has been keeping track, then you can go directly to Worksheet 1 to discuss how family expenses can be changed.
If you do not know where the money has been going, draw a calendar of the month on a piece of paper. Mark the due dates of fixed bills on the calendar. These bills are the same amount each month such as rent, mortgage, and loan payments. Then place the calendar in a prominent place such as the refrigerator door. Each day write down the flexible expenses, those that vary from time to time, for things such as food or transportation. After a month, your family will have a feel for the flow of cash and can discuss how the expenses can be changed to adjust to the income loss.
You also need to take into account your credit card and other installment debts including the interest rate, balance due, and the payment due date. When your bills exceed the money to pay them, you will need to contact the people to whom you owe money, your creditors, and explain your situation. Creditors are more understanding if you do this early rather than waiting for them to send you late notices. Knowing your spending patterns is the first step in getting ready to talk to creditors. You will also need to take a hard look at your situation and make some decisions about how much and when you can pay them. Creditors are much more open to adjustments when you talk to them soon after an income loss and when you come well-prepared to discuss a readjustment plan.
Together, the family should go through the flexible expenses from Worksheet 1 or from the calendar. Talk about ways in which each family member can reduce spending. Get everyone to commit to the spending reduction plan. Ask these questions during this discussion:
- Can we substitute a less costly item?
- How can we conserve what we have and avoid waste?
- Are there opportunities to cooperate with others by trading or sharing what we can do or learn to do?
- Can we save if we do it ourselves?
- Can we do without or do it less often?
As the family talks about what is most important, be sure you are all listening to each other. True listening is not letting someone's words go in one ear and out the other as your mind is off thinking about something else. It is devoting your energies to what the person is saying. You may need to ask each person a question about what he or she said to clarify what you heard.
