repost­ed from U.S. News & World Report 
by: Geoff Williams
Feb­ru­ary 1, 2013

Most per­son­al finance experts will tell you to put mon­ey away for a rainy day, but what do they sug­gest if you’re in the mid­dle of a tor­ren­tial down­pour, just at the point your funds have vir­tu­al­ly run out and the roof is leak­ing?

While the big pic­ture for the econ­o­my is look­ing promising–car sales, hous­ing, man­u­fac­tur­ing, and the stock mar­ket are all up–there are still a num­ber of dis­cour­ag­ing eco­nom­ic indi­ca­tors. Unem­ploy­ment hangs at a stub­born high, as does cred­it card debt. On that lat­ter point, adults born between 1980 and 1984 are esti­mat­ed to have approx­i­mate­ly $5,500 more in cred­it card debt than their par­ents’ gen­er­a­tion and about $8,000 more than their grand­par­ents’ gen­er­a­tion, accord­ing to an Ohio State Uni­ver­si­ty study recent­ly pub­lished in the jour­nal Eco­nom­ic Inquiry.

Liv­ing pay­check to pay­check pro­vides no finan­cial cush­ion, says Albert Williams, assis­tant pro­fes­sor of eco­nom­ics at Nova South­east­ern Uni­ver­si­ty in Fort Laud­erdale, Fla. “Friends and fam­i­lies become one’s cush­ion,” he says.

If your per­son­al econ­o­my has­n’t fol­lowed suit with the coun­try’s improv­ing econ­o­my, don’t lose hope. If you’re fight­ing finan­cial bat­tles in the trench­es every day, take these steps to get your finances on the right path:

Pri­or­i­tize. Some bills will always be more impor­tant to pay off than oth­ers. With so many to take care of, it’s easy to lose track of which bills should be on the top of your list. Mary Ellen Nicol, a hous­ing coun­selor at, a nation­al non­prof­it finan­cial coun­sel­ing orga­ni­za­tion, says peo­ple should ide­al­ly pay their bills in this order of impor­tance:

  1. Mort­gage or rent
  2. Food
  3. Util­i­ties
  4. Health costs
  5. Insur­ance
  6. Stu­dent loans or chil­dren’s col­lege expens­es
  7. Oth­er debts you’ve incurred

It may seem odd that Nicol ranks food sec­ondary to the mort­gage or rent. Of course, she does­n’t advo­cate starvation–she sim­ply rea­sons, “There are always ways to work gro­ceries and food into your bud­get, but you’ve got to live some­where.”

On the oth­er hand, and as an exam­ple of why it’s so dif­fi­cult to make these deci­sions, Williams has anoth­er rank­ing of impor­tance. If you’re real­ly in a jam, he says he would rank the expens­es in this way:

  1. Basic foods
  2. Med­i­cine
  3. Elec­tric­i­ty
  4. Water
  5. Trans­porta­tion
  6. Rent or mort­gage

Kel­ley Long, a cer­ti­fied pub­lic accoun­tant in Chica­go, sug­gests peo­ple who know they can pay one bill but not anoth­er pay whichev­er will keep your cred­it most intact. She’s also a pro­po­nent of what she calls the “10–10-10 rule” to eval­u­ate the con­se­quences of finan­cial deci­sions. “How will [the deci­sion] affect the next 10 min­utes? Ten months? Ten years? Whichev­er out­come has the bet­ter effect on the 10 month or 10 years should be the one you choose,” says Long.

That may not always work, depend­ing on the sit­u­a­tion, but it may keep you from, say, tak­ing out an exor­bi­tant, long-term loan to pay off short-term debts.

Not the time to be hum­ble. If you’re new to being impov­er­ished, you may not real­ize many cred­i­tors will cut you some slack if you call and ask for more time to pay. If all you need is a few days or weeks’ time due to cash flow prob­lems, don’t hes­i­tate to pick up the phone.

If your sit­u­a­tion is spi­ral­ing out of control–the sher­if­f’s notice is on the front door, cred­it card issuers are threat­en­ing law­suits for non­pay­ment, or maybe the prob­lems are just start­ing to eat away at your nerves–it’s high time to call in the cav­al­ry.

“There are many finan­cial advis­ers who work with­out fees and many non­prof­its that focus on sup­port­ing peo­ple deal­ing with debt,” says Dan White, a Philadel­phia-based finan­cial advis­er who has seen many fam­i­lies strug­gle dur­ing the reces­sion.

Stop tex­ting and start talk­ing. Talk to your spouse about what’s going on. Tell your best friend. Dis­cuss it with your par­ents. Some­one you trust may not be able to give you mon­ey, but they “can help relieve the stress and iso­la­tion of fac­ing the prob­lem alone,” says White.

What would Mac­Gyver do? Mack­ey McNeill, a cer­ti­fied pub­lic accoun­tant in Belle­vue, Ky., sug­gests pic­tur­ing your finan­cial woes hap­pen­ing to some­one else when try­ing to think of a solution–then ask your­self, “What cre­ative solu­tions can I come up with?”

Sharon Las­sar, pro­fes­sor and direc­tor of accoun­tan­cy at the Uni­ver­si­ty of Den­ver, sug­gests sift­ing through the bills and look­ing for places to trim. It may be time to can­cel the Net­flix sub­scrip­tion or scale back on your cell phone’s data plan. “If you’re able to get to work and run errands with pub­lic trans­porta­tion, con­sid­er sell­ing the car to avoid the cost of insur­ance and main­te­nance,” Las­sar says.

All of this advice is easy to offer but can be dif­fi­cult to fol­low, espe­cial­ly if you’re try­ing to main­tain a cer­tain lifestyle. But what­ev­er you do to mit­i­gate a finan­cial cri­sis, the experts agree…

Don’t pan­ic. It sounds obvi­ous, but it can be easy to for­get to stay calm when debt col­lec­tors are bom­bard­ing you with phone calls, snail mail, and emails, and the num­bers in the bank account look like some­thing out of a first-grade reme­di­al math book.

“I always rec­om­mend that peo­ple make finan­cial deci­sions with their head–not their heart. In oth­er words, not emo­tion­al­ly,” says Gail Cun­ning­ham, vice pres­i­dent of mem­ber­ship and pub­lic rela­tions for the Nation­al Foun­da­tion for Cred­it Coun­sel­ing.

Still, tak­ing that advice is so impor­tant. Says McNeill: “We tend to make our worst finan­cial deci­sions under stress.” And that is why it’s so cru­cial to keep calm in a mon­ey cri­sis. The last thing any­one needs is for today’s rainy day to turn into a mon­soon.”

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