Jennifer Derrick tells a tale at Saving Advice in Financial crisis: What do you say? about one of her neighbor families who dug themselves into a deep financial hole.

The family she described faced a “perfect storm” of bad circumstances: a job loss, slagging housing market, failure to have even a retirement fund that could be tapped as emergency resources. … (You’ll want to read the entire story and the follow-up comments)

Yes, the family in question had a lifestyle that was beyond their means in the short run, and unsustainable in the long run. But the fatal error I see is how the couple acted after the husband lost his job. Here’s what Jennifer reported:

It all came to a head when her husband lost his job in September. He’s trying to find work, but has been unsuccessful. Rather than cut down their standard of living immediately, they tried to keep going as usual to keep the kids from realizing there was a problem. They figured he would be back at work in no time and no one need be the wiser. Well, six months down the road and they can’t make the minimum payments on anything. They had no savings and no emergency fund. There wasn’t even a retirement fund to raid. They’re putting the house up for sale and hope to sell before the bank can foreclose, but they know they won’t get what they owe. This woman’s life is in a shambles because of bad choices, but it’s still a terrible thing to have happen. Even though I wasn’t surprised, I was still sorry.

Why did the couple ignore financial reality until they had no options remaining? The time to take action is not after you run out of money. It is either as soon as that pink slip flies – or ideally, as soon as you get a whiff of something bad happening in the workplace that might involve you.

Think about it: How many Monroe County families rely on paychecks whose status is getting iffy-ier by the week or by the day?

There are literally dozens of tactics that local families can use to cut back on expenses, access free or discounted services, seek financial assistance, make household budgets stretch, keep the bills paid on time, pay for a college education, reduce the debt load, improve job skills, get help with that mortgage payment, load up a retirement fund, improve property values, find additional income, etc.

The time to research the options and take those steps is long before the last paycheck has been deposited in the bank. The reason is, for best results, many budget-friendly lifestyle steps require an up-front cash expense, a serious investment of research or DIY time, or a long-range use before you see real change in the pocketbook.

Here’s a classic example: I found that switching most of our light fixtures to CFL light bulbs did save money on our electric bill. But I first had to buy the more expensive CFL light bulbs and then install them. I spread the light bulb purchases over several weeks. So it was quite some time later when DTE Energy calculated that yes, we were using less electricity and reduced our monthly budget bill payment.

Don’t ignore a financial crisis in the making. Take steps now to make your family’s money last as long as possible.

I don’t know in what state or region Jennifer lives. But I can assure you that nobody who lives in southeast Michigan wants to see another “foreclosed” sign in her neighborhood.

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