planning for low-income people
Low income can mean different things to different
people. Traditionally, it refers to people who are having difficulty
providing for their basic needs. But anyone can go through a prolonged
but temporary low-income period, perhaps because of unemployment
or steep medical bills.
Regardless of income level, anyone who has income
needs to use financial planning principles.
"Start with managing your cash flow," says Susan
O'Grady, a certified financial planner with Equipoise Wealth Management
in Denver. "Avoid debt or manage it so it doesn't become destructive.
Interest rates are high and every dollar paid toward consumer interest
is a dollar that's not available to meet needs. That's throwaway
Here comes the dreaded "b" word -- O'Grady says
the easiest way to do this is with a budget.
"A budget, spending plan, income and expense
statement -- it doesn't matter what you call it. Live within your
income capability. When you're in the working poor category, you're
already struggling to make ends meet. You're trying to live ordinary
lives, provide for your children, participate in school activities
and have fun on weekends. It's a struggle, and we understand it."
Every dollar adds up
This kind of budgeting means carrying a small notebook to track
where the money goes -- every cent.
"We're spending cash for items that don't offer
a receipt or are quickly forgotten -- fast food, soda at 7-11. That
eats away at resources. Without logging and recording what they're
spending, they don't realize that $2 a day or more is no longer
available to meet goals the family sets," O'Grady says.
One expense O'Grady says you don't want to cut
"We want to consider savings a fixed expense.
We often get a lot of flack for that -- 'What do you mean, save?'
If they can set aside $5 a week, they'd be $5 ahead. It's not much
to begin with, but it creates a pattern of working for their future
instead of coping with their past. Debt represents past acquisitions,
and it can carry forward for years. Savings creates a new mentality
about their resources. It says their future is more important than
A financial planning expert can help you decide
what expenses can be cut or reduced and also assist you in spending
your money more wisely. They may have ideas on how to shop for cheaper
car insurance, for example.
Finding affordable help
How do you get a financial planner to help you when you barely have
enough money to pay the utility bills? There are financial planners
across the country who do pro bono work; they donate some of their
time or, in some cases, charge a reduced rate. It may take a little
work on your part to find them, but a few phone calls to financial
planners in your area could get you on the right track.
Or, you can contact the Project
for Financial Independence, an organization created by the National
Endowment for Financial Education to deliver pro bono financial
planning to more people.
Nan Mead, of the NEFE in Englewood, Colo., says
her organization saw the need and worked to pull together most of
the major financial planning organizations to establish a process
to get planners in touch with people who need their services, but
can't afford to pay.
"I think the impression on the part of
most people in financial services is until people have achieved
a certain income level or saved a certain amount of money, they
really don't qualify for attention. That's why it's critical to
focus on what will help them get into the mainstream of personal
finance information and activity."
The result of NEFE's effort is the Project for
Financial Independence, which offers information and resources to
assist people in getting professional guidance for their financial
Another way to find a financial planner is to
contact the chapter of the Financial
Planning Association that's nearest to you. Ask if they know
of anyone in your area who does pro bono or discounted financial
planning. Or, check with your local community colleges. They may
offer courses that could help you or they may have a good idea of
what resources are available. It will take some time and effort,
but the payoff could be well worth it.
-- Updated: May 20, 2004