When Your Household Finances Fall Apart

You promised to love each other during good times and bad. Here's what to do when bad financial times come sooner than expected

You promised to love each other during good times and bad. But sometimes the bad times come sooner and more often than we’d like. Combine those bad times with financial trouble, and you’ve got a very unpleasant situation.

We asked financial expert Jacquette Timmons, president and CEO of Sterling Investment Management and author of the book Financial Intimacy ($11, Chicago Review Press), to tell us how to keep it together when our financial world (and potentially our relationship) begins to fall apart.

1. Stop the hemorrhaging. Discover where the money leaks are occurring. Take a close look at your expenses and detect what you can cut out. “The first thing is to put a halt to any unnecessary spending,” says Timmons.  “And that is for the purpose of getting into a new rhythm. Because for however long you’ve been married and both parties have been working, you have a pattern that is predicated on the inflow of two income streams. So now that you only have one, you’re going to have to halt what you’ve been currently doing so you can get a sense of what it feels like to meet your obligations on either one salary or a significantly reduced one.”

2. Add income. On the other hand, particularly in the case where one spouse was laid off, it will be important to make an effort to replace the lost income. Often, cutting back isn’t enough. Even if it means one of you has to work at a job that you feel is below your skill level, do what you can to bring in extra cash.

3. Don’t play the blame game. Now is not the time to blame each other for your financial woes. Pull together and work as a team. Fighting and blaming each other will just create more tension and hamper the process.

4. Prepare before another disaster strikes. Once the situation has been resolved, use it as a life lesson. After you’ve recovered, take time to put preventive measures in place. Continue to live as if one spouse still has not found a job. Don’t use the second income as an excuse to spend like you did before.

Timmons suggests adjusting your budget so that every bill is paid on one salary and whatever is left over is put away in savings. Ideally, the higher salary would be the one you and your spouse would live on and the lower salary would be put in the bank. “I always suggest that couples try to live on one salary or one-and-a-half salaries even when things are going well. That is probably the most strategic, proactive, and protective measure you can take.”

Timmons says banking one salary should be a two-pronged approach: “One is to have liquidity. The other part involves working toward long-term objectives and goals such as retirement.”

For more financial help for couples, check out Timmons’ upcoming Financial Intimacy Conference taking place September 21 in New York City.

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