FINANCIAL STRESS = FAMILY STRESS

FINANCIAL STRESS = FAMILY STRESS

We all know that financial stress affects our relationships. When we’re worried about finances we have less emotional resources to resolve conflicts. The pandemic has magnified this. Not only is it more financially stressful, but the opportunity for conflict has increased with being together all day, every day. The activities we had built into our routines for stress-relief are gone. 

How are you handling this? Are you more easily angered? Are family relationships more volatile? Are your children a little more edgy or reactive? Is sibling conflict tougher to deal with?

We are feeling this too. It is hard. It is easy to overreact and take offence. Sometimes anger, impatience and frustration set the tone in our home.

Can we redeem this time? Can we emerge from this time stronger, healthier, and closer to those we love the most? Can we create fun together instead of driving each other crazy? Instead of just surviving, we can see it as an opportunity to build some good habits and practices that will draw our family closer together?

This is our goal for our family. But we definitely need some help getting there.

Jenn Dean is a fantastic family coach and mentor who wants to help parents succeed in building strong relationships with their kids. She is encouraging and creative as she provides tools and strategies to help families move toward peace and harmony. During this time, she is offering free coaching tips at Families Matter Most and on facebook and instagram to help families reduce stress, enjoy each other, and do fun things together. 

Changing habits and implementing new strategies takes consistency and accountability. If you are committed to emerging with stronger family relationships, join us in Jenn Dean’s 6 month Parenting Mastery Class with weekly teaching.

Let’s redeem this trial. Let’s look back on this time as the season when we focused on our families and built strong relationships to weather any storm.

PREPARE FOR THE WORST (and hope for the best)

PREPARE FOR THE WORST (and hope for the best)

“The prudent see danger coming and take cover.”

So, how do we prepare for the worst and how do we plan for the unknown? When we’re in panic mode it is very difficult to plan and prioritize. A helpful exercise is to imagine ourselves one year from now. Looking back, what would we wish we had done differently in regard to our finances?

Here are a few things that I think are really important:

1. Prepare or update your will.

We all know that we should have a will and keep it updated, but it’s usually a low priority since we don’t plan on dying anytime soon. So, let’s take action and prepare our wills.
This does not need to be expensive or difficult. There are online templates to fill out and you can notarize a will for free at your MLA’s office. My husband and I plan to update our wills this week.

2. Make sure you have life insurance.

Maybe purchasing life insurance has been on you to-do list for a while. Now is the time to put that in place. Why is life insurance important? Life Insurance is a lump sum, tax free payout to your beneficiary upon your death. A life insurance policy can pay off any debts that you leave behind that would be a burden to your family (mortgage, credit cards, car loan, funeral expenses). Life insurance can help you with peace of mind, knowing that your family is protected should something happen to you.

3. Do some research and seek wise counsel.

None of us have ever lived through a global pandemic and the resulting economic fallout. No one knows what lies ahead or how best to prepare. However, we can seek out wise people and learn from them.

Recently, I’ve found tremendous help and perspective from a man named Hans Johnson. For a number of years we attended conferences lead by his wife, Dani. We found a lot of encourage and wisdom at those conferences. As we got to know them, we came to trust them.

Hans is a business man, investor, and philanthropist. Since the pandemic he has posted a number of videos regarding how the economy may be impacted in other the short and long term. He offers a big picture perspective that is eye opening. He challenges us to:

  • Prepare for the worst and hope we are wrong.
  • Do not panic, but take action.

Click here to hear from Hans Johnson (Video 1, Video 2, Video 3)

Let’s be people of action, who see the danger, and take steps to prepare.

WHAT IS A CONSUMER PROPOSAL?

WHAT IS A CONSUMER PROPOSAL?

What is a Consumer Proposal?

A Consumer Proposal is a legally binding offer to creditors by a Licensed Insolvency Trustee through the Bankruptcy and Insolvency Act. After acceptance, no creditors can take any action to collect the debt.

Who is a Consumer Proposal for? 

It is for people drowning in debt, who cannot make the minimum payments on their unsecured debts (ex: credit cards, not mortgage) over a long period of time. The combined amount of debt needs to exceed $10,000.

What are the Benefits of a Consumer Proposal?

  • It decreases the debt owed by as much as 85%. 
  • It is less severe than bankruptcy, with a smaller impact on finances and credit rating.
  • A proposal is created on your behalf and negotiations are done for you. All calls and letters from creditors stop.
  • An incredible amount of stress is removed. 
  • People who are overwhelmed by debt can get back on their feet again.

What are the Negatives?

  • It costs about $2000 for a consumer proposal.
  • The affect on a credit rating is R7 for the length of the proposal (usually 5 years) + 3 years for a total of 8 years.
  • Bankruptcy reduces a credit rating to R9 for 6 years after discharge from bankruptcy.

Our Experience

Our minimum credit card payments were higher than $1100 a month for a long period of time. While our income paid most of our living expenses, including our mortgage and most of our utilities, we had nothing left to pay the 3 credit cards and Line of Credit. This continued for months while we kept hoping things would get better, that our income would increase, and we could repay our debts. One by one, each debt went to collections and the phone calls and letters got worse. (for the rest of Our Financial Disaster Story, click here).

We were referred to a debt specialist, who calculated our income and expenses, assets and liabilities, and suggested a consumer proposal as a solution. We decided that we could make payments of $250 a month. That was a bit of a stretch for us, but much more possible than $1100! 

When we finished all the paperwork, they prepared our proposal and said they were offering our creditors $7500 instead of $32,000. As soon as the proposal is received, all phone calls and letters to us stopped and our creditors have 45 days to accept the offer. I asked why they would accept that. In creating our proposal, she looked at what the creditors would receive if we declared bankruptcy, and then offered them more than that amount.

HOW TO HUNKER DOWN FINANCIALLY

HOW TO HUNKER DOWN FINANCIALLY

Help! I’ve lost my job!

Whether you have lost a job or you are in a prolonged season where your expenses are higher than your income, the result is the same: Stress.

When we are stressed, it is hard to make good decisions, to think clearly, and to plan for the future with confidence.

We were in this position for a long time. I dreaded opening the mail (and often left it unopened for a month or more). Paying bills was extremely stressful. We owed more than we could pay and had to choose which ones and how much.

How to Prioritize

In this past week, I came across some common sense advice that I wish I had known when we were struggling.

It’s simple, straightforward, clear advice in a video by Dave Ramsey (click here to watch the video … at about 16 minutes)

I’ll sum up one of the keys ideas here

Focus on the Four Walls.

The only thing we need to do with our money when we have lost our job is take care of the ‘Four Walls’ of our house.

The Four walls are:

  • Food
  • Shelter
  • Utilities
  • Transportation

We should take care of these priorities in this order. Buying food for our family is our top priority. Then we pay our mortgage or rent. Next, we pay our utilities: water, power, electricity. Finally, we make sure we have transportation so we can get to work.

You don’t need to worry about anything else right now. Credit card payments can wait and student loan debt can wait. You don’t need to put money into investments or savings right now. Take a deep breath, and take the pressure off yourself. Your goal is simply to meet the basic needs of your family.

This is so concrete and practical. It would have reduced my stress and helped me have confidence in my financial decisions during our painful time.

During a storm, the goal is to hunker down, take shelter, and weather the storm. You don’t want to panic. You just want to lay low, wait for the storm to pass, and do whatever you need to survive through this season.

In the last half of the video, Dave Ramsey and his team also talk about finding work during this time of crisis (click here to watch the video).

HOW TO SPEND LESS THAN YOU EARN (or, how not to live on the financial edge)

HOW TO SPEND LESS THAN YOU EARN (or, how not to live on the financial edge)

Is it even possible?

This is hard. I know! We were barely making ends meet, using credit cards for unexpected emergencies, and transferring between cards to keep the interest low.

For a while it was a game and then we got stuck. We missed a few payments and the interest rate jumped to 24.9%! Then we couldn’t make the payments (for the rest of our Financial Disaster Story, click here). Most of us live this way. We drive ourselves, keeping just ahead of our financial obligations. While living at the edge of our financial means has some superficial benefits, the stress can negatively impact our health and relationships and steal our peace and well-being. We need to ask ourselves if it is really worth it.

Fantasy vs. Reality

Someone once said, “Reality is what you run into when you’re wrong”. There is an element of fantasy in living on the financial edge. While it is human nature to hope for the best, we know that something will inevitably go wrong. It could be a dental bill, a car repair, or a pandemic that pushes us over the edge. The impact can be severe if we have no buffer built into our finances.

How did we get to the edge?

Our society promotes living on the financial edge since our economy grows through borrowing and spending. We are bombarded with advertising telling us to buy whatever we want and the availability of credit removes the natural barrier to buying things we can’t afford. We’ve also bought into the idea that the perfect house, the cool car, or the dream vacation will make us happier (deep down we don’t really believe it, but the messages are constant and appealing). Unless we intentionally choose to think differently, we will be swept along into debt.

How do we step back from the edge?

Most of us spend all we earn, every month. One way to stepping back from the edge is to revisit the choices that lead us there. Living on the financial edge doesn’t just happen to us. It is the result of financial choices that did not take into account the unforeseen future that has downs and ups.

– Maybe when you graduated from university, you bought or leased a new car because you needed to get to work. The need is legitimate but there is a cheaper way to meet that need.

– Maybe you purchased a home that your family could grow into when you could have chosen a more affordable house with a cheaper mortgage.

Once we’ve identified the past decisions that are pushing us to the edge we can start to take back control. We can reevaluate those decisions and make changes.

For some it may be selling a house and purchasing a less expensive one, buying a used car instead of making payments, or cutting back on daily spending habits. The goal is to start making financial decisions that liberate some money in order to pay down debt, create an emergency fund, and have some financial breathing room for the next time life happens.

It is possible!

I have a friend who consistently, year after year, lives on 70% of her income. She saves 20%, gives away 10%, and comfortably lives on 70%. She intentionally chose to buy a home that was a little less expensive, rather than the one she could almost afford. She has money to travel internationally every few years, often spending an entire month in another country. She plans ahead and has money set aside for another vehicle in advance. I’ve seen her living this way for the past 6 years. She has peace. She has no financial stress. She is not afraid of the future.

I want to be like her when I grow up! I’m not there yet. But this is where I want to be. Prepared. Unafraid. Looking forward with Hope.

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