University of Illinois Extension

Getting Through
Tough Financial Times
Setting Spending Priorities
Whether you are faced with a reduced income or have increased expenses, you may want to use a spend-
ing plan to help you pay your bills. If you have lost a job or are sick and cannot work, your income will be
affected for more than a month. You may need to adjust your spending habits to maintain control of family
finances over an extended period.
Many families try to hide financial problems from themselves or their family members. By not facing your
financial problems, this can be very destructive to your family. It can cause worry and stress because there
is financial uncertainty. Having the lack of cash may be worse than the financial problem itself. Look realis-
tically at your situation and actively seek solutions to your problems, despite the discomfort.
Spending decisions affect the whole family, so it is important to talk to your family about the situation. Let
the family members know the family needs to change its spending. Involve everyone in deciding spend-
ing priorities. When family members understand the tough choices that must be made, and have a voice in
making the decisions, they will be more willing to accept the decisions.
When your family talks about what is most important, be sure to listen to what they say. Supporting your
family can help you pull together as a family and get through these financial times.

How Other Families Handle Reduced Income

Families who are faced with a reduced income can cut their spending. The first items to be eliminated or
reduced are the non-essential items such as luxuries, vacations, eating out, and home furnishings. If the re-
duced income continues, many families reduce spending for basic needs including food, shelter, transporta-
tion and medical care.
Families also revise their spending plans (budgets). Most make a new spending plan that includes a revised
plan for getting the bills paid.
Some families may think they can increase their income, but fewer families actually do increase their in-
come or use more credit to manage finances.
Research shows that borrowing or using credit to pay bills often brings only temporary relief and can be
more expensive in the long run. For families, who did increase their use of credit, the more they borrowed,
the unhappier they were with their financial situation.
Families who quickly made changes in their spending habits were happier with how they were managing
their finances. Families who didn’t make changes felt more out of control and more dissatisfied.

Making a Spending Plan

A spending plan is an effective tool to help you get the most of your money. It is more important when you
have a sudden change in your income. A spending plan helps you:
1. Make decisions about how to spend your money
2. Provide for needs before wants

Visit the Getting Through Tough Financial Times website at http://www.ToughTimes.illinois.edu

 3. Match your spending to your current income
4. Prevent family arguments over money
Using the Monthly Spending Plan worksheet can help you set up a spending plan for your current income.
You can see what changes are needed by comparing your income and planned expenses before and after your
current situation.

Step 1 – Your Income

Total up your current family income sources. Include income from other family members if it is used for family
expenses. Use the take-home amount, or what you actually have to spend after deductions.
Which of these income sources, do you receive income?
• Earnings from employed family members
• Unemployment Compensation
• Withdrawal from savings
• Tips or commissions
• Interest or dividends
• Social Security
• Child support or alimony
• Public assistance
• Veterans benefits
Using the spending plan worksheet, list your income before it was reduced and the adjusted amount.

Step 2 – Your Monthly Expenses

If you had a spending plan before your income was reduced, you know how much you were spending for
monthly expenses. If not, use old records, canceled checks, bills and receipts to figure out how much you spent
on the following categories.
• Housing — mortgage or rent payments, property taxes, insurance
• Utilities — electricity, gas, oil, phone, water, garbage, cable TV
• Food — groceries, eating out, school lunches
• Transportation — gas, car repairs and maintenance, parking, bus, taxi fares
• Medical Care — doctor, dentist, clinic, hospital, medicine, glasses
• Credit Payments — car payments, installment loans, credit cards, charge accounts
• Insurance — health, life, property, car, disability
• Household and Maintenance — repairs, cleaning and laundry supplies, paper supplies, towels, equipment
• Clothing and Personal Care — new clothing purchases, dry cleaning, hair care, cosmetics, toiletries
• Education and Recreation — books, subscriptions, magazines, newspapers, lessons, tuition, hobbies, club
dues, sports, pet expenses, entertainment, vacation, alcohol, tobacco
• Miscellaneous — child care, gifts, contributions, personal allowances, child support
Remember, not all of your expenses are monthly. Property taxes, insurance premiums, birthdays, and holiday
gifts come once or twice a year. It’s easy to forget about them and then not have the money to pay for them.
Use Occasional and Seasonal Expenses to help you identify and anticipate these expenses. You will need to set
aside some money in your monthly spending plan to meet these occasional costs.
As you think about what you were spending and try to plan how much you can now spend, ask these ques-
tions:
1. Which expenses are essential to the family’s well-being?
2. Which expenses have the highest priority? Deciding Which Bills to Pay First can help you determine
this.
3. Which areas can be reduced to keep family spending within its income?
4. How much can you afford to spend in each category?
Adjust the amounts you spend in each expense category and enter the new amount in the column labeled
“Adjusted Amount” on the spending plan worksheet. To practice this skill, visit More for Your Money – Debt
Management section at MoreForYourMoney.extension.uiuc.edu and help the Jones family with their expenses.

Step 3 – Balance Income and Expenses

Total up your expenses and compare them to your current total income. When your income is reduced, it may
be difficult to stay within your income. What can you do if your expenses are more than your income?
1. Cut spending. Review Strategies for Spending Less for suggestions, particularly for reducing flexible
expenses.
2. Increase your income. What are the possibilities for part-time or temporary work to help supplement
your income? Use your non-dollar resources, too. Check out Bartering.
3. Look at your other assets. What savings, investments or property do you have that could be used or
converted to cash to meet expenses? Refer to Making the Most of What You Have. Keep in mind that
borrowing and using savings may be only temporary solutions.
4. Reduce your fixed expenses. If too much of your income is going to fixed expenses such as housing or debt
payments, there may not be enough money left to cover your other living expenses. You may need to
refinance your loans, move to lower-cost housing, or surrender the property to your creditor to get out
from under some of your debt. Review Talking With Creditors and Keeping a Roof Overhead.

Making Your Spending Plan Work

Once you have a spending plan that sets spending amounts for essential family needs and balances spending
with your income, you’ll have to stick to it. Writing it down is not enough. You must use the plan to guide your
spending.
Keep a record of what you spend in each expense category to be sure you don’t exceed the amount on your
spending plan. A family record/expense book can help you list your expenditures and compare them to your
spending plan. Or you may want to use the worksheets in MoreForYourMoney.extenson.uiuc.edu By keeping
track of what you have spent, it’s easier to control your spending and live within your income.

Managing on a Seasonal or Irregular Income

If you are self-employed, seasonally employed or receive income from tips or commissions, your family in-
come may change monthly. In that case, look ahead and carefully estimate your income. It may be helpful to
estimate your income for a whole year so you can see when and how much it changes.
When your income changes from one month to the next, many of your living expenses are the same each
month. This mismatch of income and expenses creates uncertainty that can cause feelings of insecurity and
increase family tension.
To reduce this uncertainty, establish a monthly family living allowance. Use expenses you identified as part of
your spending plan to determine what it costs your family to live each month.
As a family on a seasonal or irregular income, you may want to schedule some major expenses such as insur-
ance premiums, clothing purchases, and non-emergency medical and dental care to coincide with times when
you anticipate more income. Avoid the temptation to spend more money in the months when your income is
greater.
Summary
Whether living on a reduced income may be temporary or prolonged, getting the most from family income
during this time requires careful planning and wise spending decisions.
A spending plan based on what you and your family consider to be most important can help you balance your
spending with your available income and resources. Keeping track of your spending will help ensure that you
have the money for the things your family needs most.
For more practice, visit http://MoreforYourMoney.extension.uiuc.edu

References
Take Control of Your Finances. Learn By Mail Series. University of Illinois Extension. 1995. Revised 2009.
66 Ways to Save Money. Consumer Literacy Consortium. Save Money, Pueblo, CO 81009, 50 cents each, payable
to Superintendent of Documents. http://www.pueblo.gsa.gov/cic_text/money/66ways/

University of Illinois Extension, 2009. College of Agricultural, Consumer & Environmental

Sciences/State/County/Local Groups/USDA cooperating. University of Illinois Extension provides
equal opportunities in programs and employment.