Four years ago, the City of Inglewood had $11 million in the bank. Now it has around $43 million—nearly 4 times as much!
It took a lot of creativity and heart-wrenching decision making to turn things around. But actually improving the City’s finances is not that different from what most families deal with every day. The dynamics are the same, and it got me to thinking what families could do to improve their own financial situations.
A significant part of Inglewood’s budget deficit was caused by unfunded liabilities, particularly retiree lifetime medical benefits. These benefits were extended to all Inglewood City employees during a time when the economy was robust. Administrations prior to Mayor Butts promised these benefits, but had no budget to cover them. There was no way the funds could be sustained forever, especially when the economic bottom fell out. The City was legally obligated to continue providing coverage to retiring employees, regardless of the fact that many qualified for Medicare.
Here are the three ways Inglewood managed to survive and come back from the brink of financial devastation. If you’re deep in debt, you may want to consider taking these steps as well.
Make hard decisions. The City had 2 choices: Do nothing and eventually go bankrupt or change its policy. While Inglewood had to honor its promise to take care of the health needs of former employees, it decided to discontinue lifetime benefits for active employees.
Elected leaders were criticized for making changes, but they had to make hard decisions in order to keep the City afloat. It was a matter of protecting the future and long term interests of Inglewood residents, and not just those who worked for the City.
Negotiate. It was not enough for the City to simply stop the bleeding by ending lifetime benefits. Officials had to protect future revenue by negotiating with labor representatives. They had to come to an agreement that satisfied current employees while reducing the City’s obligations.
Too often when people get into debt over their heads, they neglect to communicate with creditors. They fail to negotiate or re-negotiate the terms. This is a mistake, as negotiating could save you literally thousands of dollars, not to mention salvage your credit. You may think negotiating only works with big corporations or municipalities like the City. But creditors are usually more willing to work with you than you think.
If you are having trouble making ends meet and cannot pay your bills, figure out a different scenario that will allow you to meet your obligations. You may need to negotiate a lower interest rate or monthly payment, or different terms. Create a written plan that you can live with before you contact your creditors. There is no guarantee they will approve your plan, but it is certainly worth a try.
Explore new income sources. Elected officials took the heat again when a resolution was passed allowing the sale of super graphics billboard advertising. Residents who were against the billboards expressed their discontent loudly. Others felt advertising was rather innocuous, and as long as certain guidelines remained in place, it could bring much needed revenue to Inglewood. Mayor Butts and council members seized the opportunity to allow businesses to advertise, and came up with a lucrative deal which has been praised as a win-win.
Likewise, after you have made the hard decisions and negotiated down your personal debt, you should consider ways to increase your household income. There have never been more ways to earn money than there are now. Whether it involves moonlighting with a second job, a part time business or investment, or selling some of your valuables on eBay, there is always something you can do to get the flow of dollars going.
Take a lesson from the City of Inglewood and improve your own bottom line.