When families are faced with financial uncertainty or sudden income loss, addressing the situation takes more than just thinking about dollars and cents, says Lori Hendrickson, Extension Educator and an accredited financial counselor with University of Minnesota Extension.
“Often, when layoffs and income reduction happen, we are experiencing shock and denial that keep us from immediately making adjustments in our spending to keep us on solid ground,” according to Hendrickson.
Layoffs due to the COVID-19 pandemic are an example of events that can have significant financial impact on many families in Minnesota. Working through the cycle of grief caused by a sudden drop in income allows families to plan for how to adjust their financial picture with clear heads, and the entire family should be a part of those conversations.
Hendrickson advises, “When we are adjusting spending, it’s important to include the whole family. Talk about items in the budget that are necessary and those that can be put off or eliminated altogether. 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 work with others by trading or sharing what we can 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. By including children in the discussion, they can feel that they are contributing to the solutions.”
After determining the impact of the income loss, Hendrickson says to be sure to talk with creditors to let them know the situation and discuss when and how you may make payments. Creditors may be able to offer suggestions, but if they don’t know the situation, they aren’t able to help, so be sure to communicate.
For more information on COVID-19 resources, including managing income loss, visit: https://extension.umn.edu/news/coping-covid-19