Image by Getty Images via @daylifeFinancial IQ Philippines Quick Hit(s):
To manage cash flow better, focus on the "needs" before the "wants".
"If you are the spouse that has more of a handle on the finances, don't take it for granted that the other spouse knows these things," said Robert Schmansky, a certified financial planner with Northern Financial Advisors in Franklin, Mich. "Over-communication is better than under-communication."
Here are some tips on what couples should discuss and do in the event of a financial emergency.
1. Back to basics
"Once the shock is over, and that may take several days, you need to re-evaluate your current lifestyle," he said. "Are you able to pay essential bills -- housing, auto, utilities, health care? You need to consider cutting back on expenses until you can replace the income that has been lost."
2. Track inflows and outflows
Creating a budget and discussing it regularly can help a couple keep track of what both parties are bringing in and spending.
That also can help identify where cuts can be made. But keep in mind that the nature of your expenses will change after a negative financial event such as a job loss. For example, dry-cleaning bills for work clothes may decline while health-insurance costs will rise.
3. Come clean
Secret spenders must confess their shopping habits, and any accumulated debt, Edelman said.
4. List your assets
Schmansky recommended drawing up a list of assets, including the order in which you will access them in times of need, and the penalties for doing so.
"By creating a list and coming up with a game plan, that can help with the stress of knowing where money will come from if needed," he said. "Make sure [assets] are liquid and available."
5. Eat costs and move on
Those facing a sudden financial hardship need to let go of money already spent and not dig the hole any deeper, Edelman said.
For example, a couple who already has spent money on travel or lodging for a planned vacation should eat those costs and opt to stay home.
Ruth Mantell
July 20, 2010
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