What To Do During Difficult Personal Financial Times

The older I get the more I realize the sun doesn’t always shine and everyone, I mean everyone, at one point is going to face difficult financial times.  It’s not if they are going to come, it’s when.  Now, one of the best ways we can prepare for these challenges is to expect them and have a rainy day fund, keep our debt to a minimum and be wise in our financial commitments.

However, often times these difficult times sneak up on us when we are trying to hold a business together, or blindsided by a divorce, embezzlement or a unforeseen change in our industry or market.  These situations can occur quickly and before we know it we are living week to week financially trying to hold it together.

On a regular basis, I have consultations with clients focused on surviving in the economy and could care less about tax planning. Here are some thoughts I share with clients that have helped many during difficult times.  I hope they may help some of you, even if things are going well.

1. Look at the big picture. Take some time to re-assess both your long- and short-term career/business goals. Determine if you like what you are currently doing and if it is helping you achieve your life goals. Decide what areas you need to change in your life and create a plan for where you want to be in the future. Don’t keep beating a dead horse if the business doesn’t have any life in it.  Oftentimes we are emotionally attached to a plan of attack and we need to step back and look at the trees and being willing to make a change.

2. Crunch the numbers. Create two personal financial statements: (1) a balance sheet that lists all your assets and liabilities and (2) a cash-flow statement that shows what cash in coming in and what cash is leaving. This is not a comfortable experience and I realize many of you don’t want to look at your financial situation in black and white- It can be depressing…I know.  However, it will help you know where your money is going and help you identify wasteful spending immediately. Along with your personal balance sheet and cash-flow statement, create these two financial statements for each of your businesses ventures.  You’ll quickly see where the ‘leaks’ and losses are.  Don’t be emotionally attached to any project, employee, business or piece of real estate. Be objective.

3. Make the tough decisions. Now that you know the businesses and assets that are a drain on your resources, you can get rid of them. Maybe it’s a rental property that is not performing or a business partnership that isn’t working out. This can be hard from an emotional standpoint, but it’s a must. Start by making a punch list of three drains on your finances and get rid of them one at a time.  ALSO, be humble and realize you might have to eat ‘beans and rice’ as Dave Ramsey states.  Be willing to sacrifice where needed.  Cut anywhere possible.  Sell any luxury items.  Circle your wagons and once you get back on track you can go back to a nicer lifestyle if it’s important to you.

4. Re-evaluate your business model. As the market changes, so should your business. You need to find new ways to expand your services and get more clients in the door. Make a business plan that focuses on niche markets you want to serve and the ways you’ll add value to those customers. Don’t be married to a business model that is outdated.  Making these changes may be uncomfortable, but critical to survive.  What do you have to lose?  If your business is headed in the wrong direction, any change could make the difference!

5. Get additional education. Buy a book or take a class. Do whatever you can to expand and your skills in your occupation or business and strengthen your marketability. Just make sure you are smart in how you spend your education dollars: Look for affordable and targeted education.

6. Eliminate debt and improve your credit. Strategically pay down your credit cards. Take the card with the highest interest rate and start paying it down first, making minimum payments on all the other cards. Then move on to the one with the next-highest interest rate. I’ve said it before in prior articles and videos, please send me an email with the subject line: ‘Debt Snowball’ and I’ll send you some files you can do your self to get started with a plan. Simple, no charge.  Here’s a video on this topic:

7. Build a Team of Advisors. I realize this can be embarrassing, but you need an outside 3rd party to give you hard advice.  Call me if you have too!  You can’t do this on your own.  Get a loved one or someone that you know won’t pull any punches and give you the hard answers you need to hear.  You’ll thank them later.  THIS TEAM WILL HELP YOU!!!  Here is a video on ‘how’ to set-it up and make it operational:

Bottom line is don’t give up…AND for some of you that are just killing it and doing great.  Remember, the pendulum swings both ways and the time will come again when you WILL have financial struggles.  Prepare and remember:

“It’s not that successful people don’t have challenges, it’s that they have learned to cope with them. You can do it!”

Mark J. Kohler is a CPA, Attorney, Radio Show host and author of the new book “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions”  and “What Your CPA Isn’t Telling You- Life Changing Tax Strategies”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP. For more information visit him at www.markjkohler.com.

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