Although I am not a big fan of cliches, one that I find to be true is...."the more money you make the more money you spend." So, it is no surprise that as people begin to make more money they spend it on things or services that improve their lifestyles. Examples are a housekeeper, swim club membership, personal trainer, organic produce delivery, etc. However, I have notice in meeting with potential clients at Halcomb Singler that one of the hardest things for people who have just suffered a significant decrease in income is to respond with a decrease in standard of living until that income can be replaced.
Unfortunately, all of us know someone who has been laid off recently. It is a very difficult job market and it can take quite some time before a person is able to land another job. Even more common it seem that the person lands a job making significantly less money than their prior job. This is the sad reality of what I am seeing even in an area as well-educated and traditionally well-off as Hamilton County, Indiana. I applaud those who have taken a lesser paying job in order to gain income. I believe it is always a good idea to take a job (even if it is less money than you used to make) because you can continue to look for a better-paying job while you are at least collecting a paycheck.
However, a trend that I am seeing with not only my clients, but friends, family and in general is that when there is a significant loss or decrease in income that people are continuing to live in the exact same way they did prior to the decrease in income because this is what they are used to doing. I am writing this blog not to lecture or cast blame, but because I truly believe this needs to be pointed out so that anyone reading in this situation can take stock and evaluate their own situation. For example, I recently had a family member lose his job and it happened to be the day before this person wanted to take my husband and myself out to a fairly expensive dinner. When I heard the news of the layoff I suggested that we cancel the reservations at the expensive restaurant and instead either cook dinner or go to a much less expensive dinner. Not only would my family member not agree to either of these options, he also refused to allow myself and my husband pay for any portion of the dinner!
All of us partake in buying things or services that we enjoy and are a great addition to our lives so long as we can afford them. I, for example, pay quite a bit to work out at a Crossfit gym where I really enjoy the classes and interacting with the other people who work out there. In addition, I feel that I am getting great workouts that will hopefully benefit me in the long-term through improved health and wellness into the future. However, I have no qualms about openly admitting that if my husband got laid off from his job tomorrow that I would have to cancel the crossfit gym membership. I would also cancel the cable, cancel the organic produce delivery, stop making contributions to my church, cook every meal at home and cut out all eating out. After I did that I would sit down and try to figure out where else I could cut out expenses.
Granted, my example is fairly extreme and depending on the amount of the decrease of income this amount of cutback may not be necessary. My point is that it is important to address the reality of the situation right away and make cuts. It is easy to tell yourself that you will be able to get another job again right away and that you don't need to make cuts. It is also easy to rely on the fact that you have a 6-8 month emergency fund (if you have this) and to use this as an excuse to avoid cuts. However, the sooner you take a hard look at what needs to go and understand that a significant decrease means you cannot afford to live the same way the better off you will be in the long run. Hopefully that income is replaced fairly quickly and you don't even have to dip into your emergency fund. However, if your job search takes months or even a year or more you will look back and be happy that you addressed making changes in your standard of living early rather than allowing all of your savings to go out the window on things or services you can live without.
If you live in the Indianapolis/Hamilton County, Tipton County, Boone County, Marion County area and are considering bankruptcy I am happy to meet with you. I will evaluate your financial situation and let you know whether or not I believe bankruptcy could assist you in getting back on your feet financially. To set up this free initial consultation please call me at Halcomb Singler, LLP, 317-575-8222.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses
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