The Financial Recovery Process
|When discussing the financial recovery process, we will break the process down into four basics steps:
As we work through the module, we will examine these steps in more detail and discuss what actions you should take for each step. There are a few things to keep in mind as we discuss the financial recovery process:
Prioritize Your Expenses
When struggling to meet your monthly expenses, how might you prioritize your expenses? Can you think of any reason why you should pay some bills before others?
Your basic human necessities (mortgage/rent, food, utilities, and transportation) should always come before paying other expenses or creditors.
What should you do if you fear you cannot make your mortgage payment?
• If you cannot make a mortgage payment, or fear you are at risk of foreclosing on your home, contact your lender immediately to explain your situation and negotiate a payment plan until you can resume regular payments.
• You may also want to contact the United States (U.S.) Department of Housing and Urban Development (HUD) at www.hud.gov, or 1-800-569-4287 to locate a HUD-approved housing counselor near you.
What should you do if you fear you cannot make your car payment?
• If you are having difficulties paying your car loan and foresee that you are getting close to defaulting on your loan, consider selling the car yourself to pay off the loan to avoid the repossession expenses (e.g., towing and storage costs) and the negative impact on your credit report.
If you have other high-priority expenses you would pay these after paying your basic necessities. High-priority expenses may include:
• Insurance premiums to ensure you have adequate coverage on your home, home contents, car, health, and life
o You may be tempted to cut or eliminate these premiums, but think twice before you do. Having adequate insurance may help you and your family avoid further financial setbacks should something unexpected happen.
• Medicines, medical bills and health, vision, and dental expenses
• Other expenses that you deem important and a high priority
Prioritize any remaining expenses based on the money you have left each month. If you are unable to meet all of your expenses after determining ways to increase your income and decrease your expenses, contact your creditors and explain your situation. We will talk about contacting your creditors later in the module.
Think about the way you have been prioritizing your spending or paying expenses up to this point. Have you followed this recommendation? Do you need to reprioritize your expenses? As you are evaluating your current financial situation, you can use the My Spending Priorities table on page 13 of your Participant Guide to revise your spending priorities and identify ways you can decrease your expenses.