Archive for the How to Bounce Back from Money Misfortunes Category


Posted in General Management, How to Bounce Back from Money Misfortunes, Life Management with tags , , , , , , , , , , , , on September 15, 2010 by Robert Finkelstein

In addition to the inspirational quotes, the beautiful images, my own personal and business blogs, the recommended reading list, and information on my consulting business, I would like to share some of the writings of various thought leaders.


You can better cope with money misfortunes if you know in advance the major steps to take. How to handle six common financial challenges…

You can’t pay monthly bills because of unexpected expenses.
Take action as soon as the problem becomes apparent. Waiting until payments are past due and collection agencies are involved will only make things worse.

Divide your expenses into three categories…

Expenses that cannot be delayed. Example: Insurance premiums.
Expenses that might be deferrable if the lender agrees. Examples: Mortgage and car loans.
Expenses that are discretionary. Examples: Eating out and new clothes.

First, eliminate all discretionary spending. Second, contact mortgage and auto-loan providers. Explain that you had an unexpected expense and request “forbearance.” Propose a specific payment plan that would make your debt manageable. Mortgage and auto-loan companies do not want to get stuck with your house or car, so they often will be flexible.

Example: A 32-year-old man faced $3,200 in travel and burial expenses after the death of his uncle. His mortgage lender agreed to accept interest-only payments for three months.

You can’t pay a large, uncovered medical bill. Explain your financial situation to the hospital’s or doctor’s billing department, and ask to set up a payment plan that fits your budget. Next, speak to hospital social workers and local family-service charities to see if any grants or loans are available to people in your situation. Ask family members and employers for financial assistance — big companies sometimes have emergency loan or hardship grant money available to help employees.

If you have health insurance but your insurer will not cover the bill, get a specific explanation why. If the insurance company claims a treatment was not necessary, ask your doctor to write a letter stating why it was necessary. There are multiple levels of appeal possible if your first request is denied.

Example: A 58-year-old widow was hit with a five-figure bill when her insurance company claimed that a colon cancer treatment was not necessary. She negotiated a $200-per-month payment plan with the hospital. Then she asked her doctor to write a letter explaining why the procedure was necessary. Her insurer eventually agreed to pay a large portion of the bill. She paid off the remaining debt in less than 18 months.

You’re dropped by your homeowner’s insurance company. Unfortunately, insurers discontinue various policies — especially homeowner’s policies — all the time for all sorts of reasons. Do not bother trying to get the decision reversed — that almost never works — but do make sure you are given the grace period guaranteed by your contract before it is terminated. Then ask your accountant, attorney or real estate agent to recommend an insurance broker. Unlike insurance agents, insurance brokers work with many different insurance companies and can help you find the best rates. They often have access to better policy information than you can find quickly online.

The policies available to you might be considerably more expensive than your old coverage. Ask your broker for cost-cutting strategies. Increasing the size of copayments and deductibles often can dramatically reduce premiums. Increase the size of your emergency fund as well, in case you need to pay a large deductible later.

A parent dies with bills outstanding. Carefully go through your deceased parent’s papers, and construct a list of assets and liabilities. Keep an eye peeled for any life-insurance policies or evidence of safe-deposit boxes. (For example, the check register in your parent’s checkbook might list ongoing payments to an insurance company or a bank.) Destroy credit cards, and cancel the accounts.

When bills arrive, write “deceased” on them and send them back, with a copy of the death certificate. If bill collectors call, explain that the estate will deal with the deceased’s debts once the funds are in the executor’s control. Repeat this as often as necessary. Surviving family members are not responsible for a deceased parent’s debts (unless the debt stems from a joint account with a surviving spouse or family member). Some debts will have to be paid out of the parent’s estate, but waiting until that stage will at least allow you to sort out financial obligations first. Secured debts, such as auto loans signed by only the deceased, that are not paid off by the estate will result in repossession.

Your adult child needs financial help. First consider your own finances. Would solving your child’s financial problem create a financial problem for you? Would it significantly affect your retirement plans? If you are considering making a loan, rather than a gift, calculate how your finances would be affected if this loan were not repaid. Many loans to relatives never are repaid.

If you cannot afford to make the loan,
explain to your child that you love him/her but cannot give money that you do not have to spare.

If you decide to help, first insist on having a conversation with the adult child about budgets, spending and saving. Explain what he needs to do differently from a financial standpoint. Next, determine exactly how large a gift or loan he needs to make ends meet, and how much you can afford to give. Make it clear that this is a onetime loan or gift, not an ongoing line of credit. If the gift is sizable, inform your other children that the gift will be taken into consideration when you divide your assets in your will. This will prevent concerns about inequity.

Important: Deciding whether to assist your adult child financially could drive a wedge between you and your spouse. Agree in advance to make this decision as a team.

You lose your job. If your employer insists that you sign a release form in order to receive your severance package, don’t do it right away. It often is possible to get better severance terms through negotiation. These negotiations can be quite simple — whatever the company offers, ask for more.

If you have a good relationship with someone high up in your company, ask that person to put in a good word for you with the human resources department regarding your severance package. Insist on credit for unused vacation days and a prorated portion of any annual bonus. Ask if you can keep your company car and/or laptop until you find a new job. Request continuation of health-insurance benefits. If continued benefits are not available, see if you are eligible to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the program that allows former employees to pay out of pocket to continue their benefits for up to 18 months. COBRA coverage may be expensive, but it can be a vital bridge until you arrange other coverage.

Determine how long you can continue paying your bills out of your savings and severance pay, and decide what resources you will tap next if you have not found another job by the time this money runs out. Will you liquidate investments? Borrow from family members?

If need be, consider taking a job that you normally wouldn’t to keep money coming in, even if it has no connection to your previous experience. Sometimes these “emergency jobs” lead people into other career directions. Don’t worry that your emergency job means you will have to schedule future job interviews around your work schedule — most interviewers consider it a good thing when job applicants are working.

– Stephan M. Pollan

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