Financial First Aid Program Recap

Thank you to Amanda Zehrer from the Credit Union of New Jersey for presenting in celebration of Money Smart Week.  Recovering from a financial hardship can be very difficult and takes hard work and persistence.  Oftentimes, the shame of admitting we need help (getting out of debt, facing collection calls, dealing with a divorce) can hold us back from taking the steps needed to reestablish our financial security.  Budgeting, prioritizing our bills and debts, and creating a savings engine are all important tools to help heal our financial wounds and while it make take time, your financial well-being will be better off.  Let’s take a look at these in some more detail.

Review and Adjust Your Budget

Before you can make any changes to your financial situation, you first have to know where you stand…and that involves creating a budget.  Creating a budget can seem like a daunting task (hate numbers, don’t keep receipts), but it comes down to three components: income, expenses, and debts.  If you are enrolled in online banking, many banks and apps can make this very easy by separating your deposits and expenditures using graphs or other visuals.  However, it might be best to still write everything down.

First, start by listing all of your sources of income for the month.  Be sure to include your wages, odd jobs (babysitting, dog walking, etc.), or other sources of income such as annuities, settlement payments, child support, or alimony.  Next, go through your expenses for the month.  Be sure to pay attention to things like clothing, food, utilities, car insurance, medical bills, and general shopping; you can often separate these things into needs and wants and easily identify things you can stop spending money on, such as coffee, cigarettes, eating out, etc.  Lastly, you want to list all of your debts; these include mortgage/rent, credit cards, students loans, personal loans, and car loans.  Add up your expenses and debts and then subtract that number from your income.  If the result is positive, that’s good, but could it be better?  Perhaps you can cut out small things from your expenses to start paying off your debts faster or contribute more to your savings or retirement.  If the result is negative, you need to take a serious look at your financial situation and find ways to reduce expenses and pay off or reduce your monthly debt payments.

Prioritize Bills and Debt

One of the most common ways to help with financial difficulties is to reduce your expenses or debt.  First, start off by prioritizing your bills and debt to determine what are the most important.  Be sure to take care of your essential needs first like food, housing, and medical.  Next, determine what utilities are most important (water, electric, gas) and which you can go without (cable, internet, cell phone).  Look at your bills and see if there are any that have severe penalties for non-payment, such as child support or back taxes.  You may need to forgo payments on other bills or debts for a few months to make sure your necessary bills and debts are being paid on time.  This may include voluntarily returning vehicles with outstanding loans.  While this can be a stressful and emotionally overwhelming task, it is necessary to help figure out which creditors or groups you need to contact to see about reducing your payment.

One you have everything prioritized and have developed a plan of action, you can start trying to build back your credit.  Be sure to pay everything on time, especially if you have negotiated new terms with creditors or were enrolled in financial hardship repayment programs.  Try to keep new balances low so that you don’t run into more financial issues.  Use secured credit cards with a reputable institution to help learn to control your spending.

Creditor Communication Tips

Unfortunately, the only way to reduce your payments to creditors is to contact them directly, oftentimes by phone.  This can be a very stressful process, but it is the only way to try and get some relief.  Be specific and honest about the reason for your hardship, such as loss of employment, unexpected medical bills, or a divorce.  Discuss your plan for the future, such as upcoming employment, to demonstrate that you are taking your debt obligation seriously.  If you can only pay a small amount toward the debt, let them know what you can afford.  They may be willing to accept lower payments now and add the remaining balances of those payments to the end of the loan.  However, don’t make promises you can’t keep because you may only get one chance to negotiate better terms so don’t waste it!

Initial conversations with creditors can be very difficult and they may be unwilling to help.  It is important to remain calm and polite, even when dealing with a frustrating situation.  You can always ask for a supervisor to try and get a different resolution.  Be persistent in your communication with them, which may eventually lead to positive result.  Always take notes on each conversation you have, making sure to take down names, reference numbers, and the terms of any deals discussed over the phone.  These details can be very important if the creditor does not follow through on terms negotiated by the customer services representative.

You also have certain rights when it comes to dealing with creditors as stated in the Fair Debt Collection Practices Act (FDCPA).  Creditors cannot do any of the following:

• Calling you multiple times a day or at inconvenient times
• Contacting you at work if your employer disapproves of the communication
• Letting a third party (family member, friend, employer) know they are trying to collect a debt
• Using false threats, obscenities, racial slurs, or insults

More Information

If you have any questions about your financial situation or need financial help, please contact Amanda Zehrer at azehrer@cunj.org.  You can download a copy of the handout, which includes great tips and ways to track your finances at https://www.njstatelib.org/wp-content/uploads/2022/04/Financial-First-Aid-Handout.pdf.  You can view a recording of this webinar at https://youtu.be/oWSp1Ka8Eh8.