Most businesses and individuals we see have plodded along for years with mounting unresolved financial problems. Too often, through a lack of careful thought and planning, they make matters worse. So herewith our modest proposal for the new year:
1. Do a year-end review of what your earnings were and where they went. If it was a good year, will that continue? What will be different this year coming up? Do we have to adjust our spending?
2. Look at what may have caused trouble last year, and work out a plan how to avoid it happening again. If bad luck or a bad call has put you or your business in a bind, work out a plan to get out of the bind. Maybe the plan involves paying down debt. Maybe a bankruptcy or other debt relief should be considered as an option of last resort.
3. Do a budget, or cash flow projection, so you have some idea what has to be spent each month, and what will be coming in. Many people avoid this for several invalid reasons:
a. “We don’t have exact figures for all our expenses”. Folks, the numbers do not have to be exact. Give it your best guess. Then with those figures in place, you can compare them to what is actually being spent.
b. “Those expenses do not come up every month-how are we supposed to put a number on them?” Examples are auto repairs, medical expenses, equipment repairs or replacement, home repairs. The trick is to look back and figure out how much is spent over a longer period, say a year, then convert that to a monthly figure. Most people know how often they have to replace tires on a car and what that costs. Say the figures here are $500.00 every 3 years. The monthly figure is 500/36 or $13.90 per month. The goal is get a working figure in place for planning purposes.
c. “My income is never the same” Response here is the same as above. Put together an average. Some months will be better, some worse. So long as you stick to the plan, over time it all works out.
d. “I know I am in trouble…why do I have to do this? It’s depressing.” What is depressing is being out of control. A budget is the first step in a plan, and a plan is the first step in taking back control of your life. No matter than you are running short each month. At least you know where you are, and can know what needs to be done to set things right.
4. Develop a plan and consider all alternatives. Bankruptcy is a choice that few want to make, but it is an alternative to learn about. Whether or not it is something you do, knowing what is involved and how it works for you can avoid your making things worse needlessly.
All these are tasks you need not do alone. Advice from qualified professionals may be the best money you spend. Talk to your accountant. Assemble the needed records. Talk to a qualified bankruptcy specialist not just about bankruptcy, but also some ways to avoid it.