Financial planning for low-income people
By Laura A. Bruce • Bankrate.com

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 money."

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 is savings.

"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 their past."

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 situation.

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