Part 4  Take Action!

I have found that whenever I am overwhelmed, I move toward doing nothing.  I just want to shut down and ignore everything.  Running away feels like the right thing to do.

Yet, the FACT is that running away will just make the situation worse.  Will it be extremely difficult to work through this situation?  AB-SO-LUTE-LY!  But the cost of NOT doing something is even more difficult!  You CAN do this.

Below are some practical tips that have worked for me when I have wrestled with overwhelming situations. 

• Action List  I prepare a list of items and prioritize them
• Establish accountability  Someone who I trust who will hold me accountable to my actions
• Seek Help  Here at NewSpring Church, we provide FREE one-on-one financial counseling for over 500 people each year.  We provide this service on-site at all of our campuses.  You can request this free counseling HERE.  We will not try to sell you anything.  Our counselors are winning with their money and are passionate about helping folks do the same!

Read the entire series

Part 3  Prioritize

When the financial sky is falling down and the walls are closing in on you, it is imperative that spending is prioritized.  Here is my suggested order of priority for spending when there just is not enough to pay everything.

1. Housing  Must take care of the mortgage and utilities first.  Now if the mortgage payment has run out of control and it is 60% of one's take home pay, then it is high time that the house be sold or income be tripled within a couple of months.
2. Food  I am going to eat before one single bill is paid!  We must be able to eat.  I am not talking about Olive Garden or fast food.  I am talking about groceries bought with coupons and much attention to frugality.
3. Transportation  If transportation is required to produce income, then it is imperative that the vehicle payments, insurance, taxes, gasoline, and maintenance be funded.
4. Back Taxes  Owing the government back taxes is a terrible thing, and it must be addressed.  I would rather owe anyone besides owing Uncle Sam!
5. Secured Debts  If there is additional money remaining after Housing, Food, and Transportation are taken care of, it is time to pay the secured debt payments.  This is debt where the lender can come take something – like a car, boat, motorcycle, tractor, etc.  If the lender repossesses the item, they will sell it at a wholesale auction and come after you for the difference.
6. Family & Friends Debts  If you owe family and friends and you still have some money left, it is essential to pay on debts owed to family and friends.  Unpaid debts to family and friends has been the cause of untold relationship issues since time began.  Avoid this!
7. Unsecured Debts  It is time to address the unsecured debts.  Credit cards, student loans, signature loans, etc.  One thing to note is that unsecured debt holders will be screaming and hollering the loudest because there is nothing they can come take from you.  As a result, they will try to play upon your emotions to get you to pay them before you pay anyone else.  And it works!  I have met with a lot of people who have kept their credit cards current while letting the house payments fall behind.  Not good!

Go back to the spending plan you have prepared and ensure that your priorities are in order.

Part 2  Ask Questions

It is extremely important to ask questions that help define the true root cause of the issue.

When I am counseling someone experiencing this sort of situation, I have a series of questions I ask to help me grasp the issues.  Here are some of the questions for which I am seeking answers.  These are not in any particular order.

• "What was the cause of this situation?"  Ultimately, I am trying to determine if the current situation is the result of a long series of financial decisions or the result of a catastrophic event (job loss, medical issue without insurance, death of income provider, etc.)
• "Is this an INCOME or an OUTGO issue?"  I want to see where the money is going.  That is why Part 1 is so important.  The spending plan will help you more clearly determine the answer to this question.  From experience, I have seen that it is an OUTGO issue in most cases.
• "What are the required debt payments"  Is this unsecured revolving debt (credit cards) or is this installment debt on an asset (car, boat, motorcycle, etc.)?  This question will be key for Part 3 of this series.
• "Is there something that can be sold?"  If there are items that can be sold, this needs to be fully investigated to understand how it can help the situation.
• "What expenses can be stopped?"  Are there any "extras" in the OUTGO?
• "How can INCOME be increased?"  An extra job or tons of OT may not be appealing, but living in a squalor of debt with no hope is even worse!  It is very important to investigate short-term ways to increase income to get out of the current late bill payment situation.

Readers:  What other questions would you add to this list?

This is a series written for those who are struggling mightily with their finances and tough decisions are being made about who will be paid and who will not be paid.  It is my hope that this series will provide practical steps that can be taken to walk out of this situation and into financial freedom.

Part 1  Prepare a written spending plan

There is so much power in a written spending plan!  I never realized where all of my money was going until the day that I began planning my spending.

You might say, "But Joe, I know that the outgo is more than my income so why should I even bother with preparing a spending plan?"

I would respond with this answer.  "It is hard to slay a dragon if you do not know how many heads it has!"  A spending plan will ensure that you know the ACTUAL situation instead of the IMAGINED situation.

So go ahead and prepare your plan – even if you know it is going to be awful.  This is the start of your journey to financial freedom! 

You can use the free budget tools HERE to get started on your plan.

Helpful Tools/Articles

• Free Budget Tools
• "How Do I Budget?" Series