NDSU Extension Service - Ramsey County

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What are Your Spending Priorities?

What are Your Spending Priorities?

 

Faced with a reduced income, many families wait six months or longer before they reduce their spending, accumulating debt and unpaid bills. Many people try to hide financial problems from themselves or family members.

Not facing problems can be very destructive because the worry and stress caused by financial uncertainty and lack of cash may be worse than the financial problem itself. It’s important to look realistically at the situation and actively seek solutions to problems, despite the discomfort.

Because spending decisions affect the whole family, talk with your entire family about the situation. Let them know the family needs to change their spending.  Involve them in deciding spending priorities. If family members understand the tough choices that must be made and have a voice in making the decisions, they will be more willing to accept the decisions.

As your family talks about what is most important, be sure to listen to what others say. Supporting each other can help you pull together as a family and get through these hard times.

Studies show families first respond to reduced income by cutting back on their spending. Spending for nonessentials such as luxuries, vacations, eating out, and home furnishings is eliminated or reduced almost immediately.   As the period of unemployment or reduced income continues, many families also report reduced spending for basic needs including food, shelter, transportation and medical care. Families also say they revise their budgets several times.

Some families reported using more credit as a way to manage during unemployment. Borrowing or using credit to pay bills often brings only temporary relief. For those families who did increase their use of credit, the more they borrowed, the more unhappy they were with their financial situation. Studies also found that families who quickly made changes in their spending habits were the most satisfied with how they were managing during unemployment. Families who didn’t make changes until much later felt more out of control and more dissatisfied.

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