Knowledge is power when it comes to taking take control of any situation. When you arm yourself with clear information, it’s much easier to map out a smart plan to deal with whatever is happening … including the ups and downs of today’s economy. That’s what this article is all about: giving you ideas to protect yourself and take control of your financial situation.
Please note that these are general ideas. You may need to work with your accountant for guidance and planning that can ease your specific situation.
INDIVIDUAL credit, retirement funding, and housing
The credit crunch
Have you recently discovered limited lending opportunities or taken a hit on your FICO score? You’re not alone. Many credit card companies and lenders have tightened their policies, changed rates and fees, and dropped FICO scores for a number of reasons, even with people who pay their bills on time. So what can you do about it?
First, know exactly where you stand regarding your credit score as well as your card balances, interest rates, monthly minimum payments, etc. Request a free credit report at this official government site: www.AnnualCreditReport.com. You can also get your FICO credit score on the same site for a small fee (ranging from $7.95-$12.95). Also, call the creditor and ask what happened. If there’s an error in your favor, it can be corrected.
If you’re not happy with your credit card provider… consider transferring your balance to a new lower-APR card and saying goodbye to the company. This is the same with banks who begin charging fees for services you enjoyed fee-free before.
If your FICO credit score is lower for some reason, you CAN repair it. The Federal Trade Commission’s helpful website: Credit Repair: How to Help Yourself (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm), states, “You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.” You’ll find detailed steps for repairing your credit score over time and more importantly, avoiding “credit repair” scams.
Retirement funding and investments
It’s safe to say that most retirement funds have taken a beating, but it doesn’t have to remain that way. Once you know exactly where you stand, you can possibly take actions to stop the erosion, stabilize your investments and perhaps even find opportunities for growth. It’s all about turning frustration and helplessness into the following actions that put you in the driver’s seat.
Gather your statements to get a clear picture of exactly where you are today. This includes your 401(k), IRA, Roth, individual stocks, savings accounts and any other funds earmarked for retirement.
Address the situation immediately to improve your chances of bouncing back. You can do it yourself using general online resources such as Money Magazine. But since every situation is unique, we strongly suggest that you talk with your accountant, who will review your investment portfolio and provide personal guidance on what to do next.
When you work with your accountant, you’ll get an objective yet personal view of your situation and have an ongoing source of support as you make adjustments.
Housing: mortgage payments, foreclosure, buying a home
There are a number of resources designed to help you keep your home or buy a home within today’s lending environment. The Federal “Homeowner Affordability and Stability Plan” and “Making Home Affordable Program” were both designed to help homeowners keep their homes in today’s challenging economic climate.
You may benefit from the plan’s “The Home Affordable Refinance Program,” in which eligible borrowers may refinance their loans; and “The Home Affordable Modification Program,” which offers assistance to homeowner-occupants in default or at risk of default.
In addition, home loan money is becoming available again with slightly looser requirements, making it somewhat easier to buy a home.
For complete details, we suggest that you contact:
The institution that currently holds your mortgage, or a foreclosure specialist who works in your community
Your local bank, credit union or mortgage lender if you’re looking to buy a home
SMALL BUSINESS credit, cash flow and employee panic
If you happen to be in a panic these days over your business finances, you’re not alone. But all is not lost. We have a number of ideas that may help you take control and feel better.
First of all, it’s important to stop feeling like a hamster running endlessly in a wheel. Take a deep breath and evaluate where you are now. It will pay to take a fresh look at everything you’re doing and tighten up wherever possible — from your payables and receivables, to your expenses and staffing practices.
Address payables head-on:
If you’re falling behind on payables, talk to your creditors instead of ignoring or delaying any problems. It’s much better to have a conversation now and set up a payment plan you can live with.
If you’re having a hard time making payments to the bank, talk to the bank. Or, bring in your accountant for guidance on how to look at various options before approaching the bank.
Tighten up receivables:
If you’ve been too lenient on slow-paying receivables, tighten up the terms and send a friendly message that lets everyone know the new process. Perhaps it’s a shift from 30-day to 15-day payment due dates. Or 50% deposits, with balances due upon receipt of the completed work.
Prevent taking on clients that do not seem ready to pay at least a portion up front. Some companies have switched to cash or credit card payments taken upon order or delivery. Consider ways to make money come in faster for everything you do!
What can you cut back on? Where can you find efficiencies? For example, we switched from a monthly bottled water service to using good ‘ole Sebago Lake tap water with a filter system, and we’ve saved $1,000 so far. Look at every single expense and find cheaper alternatives, from generic brand pencils and paper clips to big-ticket items used regularly for your operating needs.
Plus, what expenses can you put off for now? Can you get another year out of your copier/printer lease instead of upgrading to the new model and paying more, for example?
Rethink your staffing:
If you’re feeling overstaffed, this may be a great time to give a full-timer that part-time position he or she has been asking about. Or before you hire a new staff member, be sure to think about that person’s responsibilities and see if they can be spread around to existing staff, or even yourself.
If your employees are anxious, involve them in the solutions. Ask for suggestions to stay on top of finances and reduce expenses. Tough times call for creativity! You may be surprised and delighted by what your team suggests.
In addition, we can come and talk with your employees to ease their personal money concerns. You’ll be a hero to them, and in return, help them focus on your business, not their personal fears, while they’re on your time.
Our financial articles are presented by Honeck O’Toole, Maine-based certified public accountants. If you ever have questions about your finances, please email us or call 207-774-0882.