Survival Plan for Maintaining Financial Stability During Sequestration

Posted on Saturday 15 June 2013

National Foundation for Credit Counseling encourages consumers to take action

Sequestration is now in place, and along with it came a good amount of uncertainty, causing many Americans to wonder how they will be impacted. By some estimates, more than one million employees of federal agencies may receive furlough notices.

Some workers are not adequately prepared to deal with a loss of income, even a short-term one. For those living from paycheck to paycheck or without significant savings, any income interruption is likely to put them over the financial edge.

For example, consider the statistics below from the NFCC’s Financial Literacy Survey:

  • Thirty-three percent of respondents admit to not paying all bills on time;
  • Thirty-nine percent have zero non-retirement savings;
  • Thirty-nine percent carry debt over from month to month, and
  • Sixteen percent have utilized overdraft protection in the last 12 months.

Even if a person does not anticipate being impacted by sequestration, now is a good time for a comprehensive financial review. Whether due to an unplanned expense or a job loss, no one has ever regretted being financially prepared, and preparation starts with understanding where you stand today.

The NFCC advises consumers to take the following steps to put themselves in a better financial position, regardless of what the coming months may hold:

  • Assess Current Financial Situation – The NFCC’s free financial self-assessment tool, MyMoneyCheckUp™, is a good place to start. The tool provides consumers with a means of evaluating four key areas of personal finance: budgeting and credit management, saving and investing, planning for retirement, and home equity. After answering a series of topic specific questions, a personalized assessment of the individual’s overall financial health and associated behaviors is generated. With areas of concern identified, the analysis suggests changes that consumers are encouraged to implement in order to become more financially independent. The traditional green, yellow, and red traffic light colors signal whether the consumer should continue on their current money path, proceed with caution, or stop and make a change. Individuals can also complete an optional budget to further help them assess their financial health. The tool is available in English at www.MyMoneyCheckUp.org and in Spanish at https://www.miayudafinanciera.org.
  • Face the Financial Facts – After completing the financial discovery step, consumers may find the results surprising. Don’t ignore them. Financial problems rarely resolve themselves, particularly in emergency situations. Take action sooner rather than later, as delaying only makes the problem harder to resolve.
  • Take Control – Admittedly, some things are beyond a person’s financial control, but some aren’t. Control what you can by doing the following:
    • Review your credit report and score, both necessary to fully understand the current financial situation, and provide a framework for next steps.
    • Create a cash-flow calendar listing all sources of income. Next, plug in the dates all bills are due. This will ensure that bills are paid on time and protect the credit report and score from future damage.
    • Commit to paying down debt, and if necessary, suspend all charging, consistently moving toward solid financial ground.
    • Reach out to a legitimate credit counseling agency for help creating a survival plan.

If there is a quick resolution to the sequestration, nothing has been lost by implementing the above steps. If not, you’ll be better prepared to face whatever comes your way financially.

savvy @ 1:09 PM
Filed under: General Finances
Save money or pay off debt – 3 Factors to consider

Posted on Monday 3 June 2013

If you’re one of those who has got outstanding debts and also have disposable income, then the obvious confusion you’d be facing is whether or not you should save money or pay off your debt. Now, this is indeed a tricky situation and needs to be given careful thought. With the economic crisis that’s prevalent all around, it’s definitely not a happy world all around at least as far as finances are concerned. This gives all the more reason for you to consider how exactly you’re going to balance saving money when paying off debt.

3 Crucial factors for you to consider

In the debate between whether or not you should save money or pay off debt, there are 3 crucial factors that you’ve got to take into consideration. After all, it’s only when you judge these factors and weigh the pros and cons would you be able to come to the right decision ultimately.

The concept of free money

Fact remains that the concept of free money makes saving all the more attractive. For instance, if you choose to save a certain amount in a retirement account, then it could ultimately go on to mean more money especially if the amount goes on to be saved in a 401(K) plan along with your employer making a worthwhile contribution. Moreover, there’s also the prospect of being eligible for the savers tax credit and that can go up by a considerable amount. This credit would also be available even when you choose to add the amount to an individual retirement account. All the more reason why it proves to be beneficial is the fact that it aids in reducing the cost that’s associated with funding of your retirement account. Hence, you see in your endeavor to pay off debt you can’t really ignore saving altogether.

The interest cost against the interest earned

This again happens to be a rather common decision swaying factor and it includes the cost of the debt versus the interest that you could be earning on the saved amount. Given this situation, your main objective would be to determine the net financial results of savings plus interest against the reduced interest on debt. The best idea would obviously revolve around the fact that you split your disposable income between saving and paying off debt. No need to reiterate that saving remains important at any given point of time. For it’s more than obvious that savings is essential. Without savings it’d almost be as though you’re hunting for financial salvation in the dark with no idea of which way you should go.

The necessity of rainy day fund even when paying off debt

In case it so happens that you don’t yet have a rainy day fund set aside, then well it’s high time that you worked on one. This is obvious since a rainy day fund is the only thing that can come to your aid, be it in case of an emergency or even for paying off huge debt amounts. Financial emergencies are known to take people by surprise and it’s for instances like this that you need to be prepared. For in your quest to pay off debt, if you haven’t put aside any savings, then it’s quite likely that you’re going to hit a roadblock when faced with an emergency which is going to pull you deeper in debt.

So, you see there actually can’t be any debate when it comes to saving for it’s all important and will remain so. The essential idea is to set aside proper savings that’d in turn help you pay off debt.

About the author: Janice Burns is a renouned writer associated with debtcc.com for the last three years and has written articles on several topics. She is an expert in solving money related problems of innumerable people. Some of his master pieces are based on topics such as finance, credit card, money saving tips, budgeting and so on.

savvy @ 6:52 PM
Filed under: General Finances