"Many people are reluctant to face financial problems themselves or may hide them from their family members, and that can be destructive. Take a realistic look at your situation, adjust spending accordingly, and involve everyone in the family in deciding spending priorities," she said.
When family members understand the tough choices that have to be made and have a voice in making the decisions, they'll be more willing to accept the family's new economic reality, said Taylor.
The expert cautions against borrowing money or using credit to pay bills. "That will only bring temporary relief, and it can be more expensive in the long run," she said.
Families who quickly make changes in their spending habits to accommodate the new reality are happier and feel more in control of their situations. "And that reduces stress," she noted.
Taylor recommends getting serious about a spending plan that matches your spending to your current income.
Step 1 involves totaling up your current family income sources. Use the take-home amount; that means the figure you actually have to spend after deductions. Income sources will include: earnings from employed family members, unemployment compensation, withdrawals from savings, tips or commissions, interest or dividends, Social Security, child support or alimony, public assistance, and veteran's benefits.
Step 2 is figuring out how much you spend monthly on housing, utilities, food, transportation, medical care, credit payments, insurance, household and maintenance, clothing and personal care, education and recreation, and miscellaneous (child care, gifts, allowances, child support, etc.).
Remember that not all your expenses are monthly, said Taylor. "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. You'll need to set aside some money each month to meet these occasional expenses."
As you think about what you used to spend and try to plan how much you can spend now, ask yourself these questions:
• Which expenses are essential to the family's well-being? • Which expenses have the highest priority? • Which areas can be reduced to keep family spending within the family's income? • How much can you afford to spend in each category?
Total up your expenses and compare them to your current total income. What can you do if your expenses are more than your income?
• Cut spending. • Increase your income. Can you find part-time or temporary work to boost your income? • Look at your other assets. What can be converted to cash to meet expenses? • Reduce your fixed expenses. If too much of your income is going toward housing or debt payments, 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.
Still feeling overwhelmed? You're not alone, said Taylor. She recommends visiting U of I Extension's "Getting Through Tough Financial Times" website at http://www.ToughTimes.illinois.edu.
"You'll find lots of helpful information on coping with financial difficulties as well as easy-to-use worksheets that will assist you with setting spending priorities," she said.