Financial Difficulties? 7 ways to better your situation.

Posted on March 07 2007

Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law. (Romans 13:8)

Have you failed to alert creditors about your financial hardship? Instead of running from the creditors, call them up and let them know about your situation. If you know a layoff is coming or a financial hardship is about to occur, do some damage control immediately. The best time to negotiate with the companies is before the problem hits. Find out if they would be willing to temporarily lower your interest rates or help you figure out another payment plan. Many creditors will work internally with you to help you through your financial hardship.

Are you paying bills in no particular order? Housing should be the number one priority each and every month. After the mortgage or rent payment, vehicle, groceries, and utility bills should fall in line. Secured debts are obviously more important, since they can be taken away from you through foreclosure and repossession. Unsecured debts will need to be paid too, but the importance of food, shelter, clothing, and transportation always trump the credit cards. Make sure that you are paying the most important things first, so in case of a set-back you don’t find yourself in a bad situation.

Have you been monitoring your credit reports? You should be checking your credit report at least once a year. Many have errors and you will be doing yourself a disservice by not pulling them frequently. They are crucial for obtaining better interest rates, landing a job, and stopping identity theft. Your credit score also determines how high your interest rates will be on loans, such as vehicles or home mortgages. You can receive a free credit report on-line at AnnualCreditReport.com. Keeping an eye on your credit report will keep your interest rates low, raise your credit score, and help you obtain credit in the future.

Are you only making your minimum payments? If you are only making the minimum payments each month you are falling into the trap that the credit card companies want you in. Minimum payments basically go directly into the companies pockets, so you rarely see your balance come down. All you are doing is paying interest and fees. You will never get your credit card paid off doing this. If you want to see your balances come down you need to at least double the minimum payments. Now paying the minimum payment isn’t always bad, since it can keep you current, eliminate late fees, and help you through the tough months. But if you want to start eliminating credit cards from your life you have to make more than those minimum payments to do so.

Do you have a budget in place? Many people feel that budgeting is just a waste of time, but in all actuality budgeting will show you exactly where your money is going and benefit you financially. It will stretch your dollars further and help you track your spending. Budgeting is a very useful tool that should be implemented in your home every month. You will be surprised by how much you spend and you will be even more surprised by how much you save if you set up a reasonable budget that the whole family can live within. If you decide not to budget it will be a waste of money, not time.

Are you saving for emergencies? Set yourself up with an emergency fund. Don’t procrastinate on this one. It’s not a matter of if; it’s a matter of when. Car problems, medical visits, and unplanned bills are all a part of life. Someday you will need that emergency fund and if you don’t have one you will most likely have to use the credit cards to pay for it. This will force you to have large balances causing interest to accrue and debt to pile up. Take ten or twenty dollars per pay check and set up a savings account. This will add up quickly and can be a true security blanket when needed.

Are you charging your purchases instead of paying in cash/debit card? I have always said that credit cards equal convenience. It is a lot easier to throw the credit card down than it is to write out a check or count out your cash. This is definitely what the credit card companies want you to believe. How often do you use your credit card on those insignificant purchases when you could have just as easily used cash or even your debit card? This raises your balances and costs you more money in interest. Why not use cash, check, or a debit card and save yourself some money? Using this method of payment will not only save you money, but will help you live within your budget too. It may not be as convenient, but it sure is worth it.

-Jeral Croaker FLCS Certified Credit Counselor