Often times I talk about being healthy, eating right, and exercising in order to become fit. Well the same applies to your pocket book. Keeping a nest egg for rainy days or topping up your credit score is always a safe practice to being financially fit. Although the news reports say our economy has started to turn for the better, unemployment rates are still at an all time high, in fact I know a few unemployed people myself and I myself was laid off due to the economic bust, plus those who are fortunate enough to have a job are underemployed.
There is no worse timing than being one pay check away from broke to experience a financial avalanche. You barely have enough as it is, then something tragic happens like you fall ill and the health insurance doesn't cover your particular needs, you get laid off and unemployment doesn't cover your financial needs so you risk losing your home through foreclosure or you have a car accident and the insurance adjuster deems it a total loss. What do you do now?
You can look at the glass as half full and get your financial fitness routine in order or you can sob, wine and wish you had more money. I am choosing to put a financial plan in place so that I can be where I want to be in 10 years time. How many times have you dreamed of something in your early twenties, let's say:
I will be making X amount of dollars by the time I'm X age
I will be driving X kind of car by the time I'm X age
I will be retired by the time I'm X age
Then to only reach that age, look back and wonder where the time went because you haven't reached that goal.
The truth is when it comes to money it has a time value and NO you can't turn back the hands of time. Have a pity party about those silly credit cards you maxed out on clothes, cut them up and throw them away. Take a few moments to grieve over the house you had to foreclose on due to unforeseen circumstances like the loss of a job or your rental tenants flaking on their rent. Stand still for a moment in time to deal with filing bankruptcy AND THEN GET OVER IT! Move on because everything else will. Over time those credit card debts will age and loose their daunting hit on your score. Over time that bankruptcy or foreclosure stamp will lose it's depreciating value on your score. Time heals all wounds, even the financial ones ☺
Once your credit has been jacked up you can bounce back from it and here's how according to me and yahoo finance:
1. If you live in an apartment, check comparable rents in your neighborhood.
2. If you own a home and it's salable, sell.
Put any net gain into savings and investments, and find an apartment to rent. You'll be saving the high cost of maintaining a house, as well as tax and insurance bills.
Don't hold onto a house because you think you "need" the mortgage interest deduction. Financially, you're far better off without it. As an example, say that you're paying $1,000 in interest, in the 25 percent tax bracket. The taxpayers cover $250, leaving $750 as your net cost. Now imagine that you have no mortgage and $1,000 in income. You'll pay $250 in taxes, leaving you with $750 in your checking account. Losing the mortgage gives you more money to spend.3. Restructure your credit card debt.
4. Start a debt-repayment plan. Pay off the cards with the highest interest rate first!
5. If your cards have already been written off and the debt collection agency is calling, NEGOTIATE YOUR PAYBACK. Don't let the angry man or woman over the phone scare you into paying back what you owe with threats. 90% of the time they will take a reasonable offer.
6. If you have money in a 401(k) retirement plan and your job is safe, consider borrowing against it.I wouldn't recommend this for nearing retiree's.
7. If you don't have health insurance, any major illness could put you into bankruptcy.
Try for a high-deductible policy, or see if you (or your kids) qualify for Medicaid or the children's program, Schip.
Once you have paid off your debts or they have been forgiven through other means it is time for you to rebuild.
You can do so by applying for a secure credit card to re-establish yourself. Usually your bank or other creditors offer secure cards where you pay the credit balance in full and borrow against yourself.
Be sure to take heed to the woes and obstacles you have overcome in order to avoid those hassles in the future. Next time you have that pretty new dress in had and go to pay for it with your credit card ask yourself how much will it REALLY cost you in the big scheme of things. ☺
Great Resources:
