From Depressing Debt to Financial Security
How to Recover from Credit, Income, and Other Money Problems
Sep 17, 2008
When you’re broke, the prospect of ever getting ahead can feel hopeless. However, because doing nothing will get you nowhere, it’s time to turn your finances around by doing something.
Snap out of Financial Depression
Stop scowling, complaining, and moping. If you don’t reverse a defeatist attitude, you’ll remain exactly right where you are today – or end up in an even worse position. In most cases financial troubles are absolutely fixable, so take a moment to say these words: “It’s only money; I can do this.” Repeat as necessary. Need more motivation? Look to those who’ve overcome incredible economic adversity. After all, you’re hardly the first person who’s been down and out. Read an inspirational rags-to-riches book, such as Forbes Great Success Stories: Twelve Tales of Victory Wrested from Defeat, or rent the movie Pursuit of Happyness.
Face Your Money Problems
Never attempt to outrun financial troubles; they’ll win a footrace every time. Instead, confront them with courage:
- Open your mail. Before you can fight the good fight, you must understand what you’re up against. The sooner the better, too, as early intervention can offset a lawsuit from those who would really like their money back. Become aware of your account balances, interest rates, applied fees, and any impending or current legal action. If you don’t even know whom you owe anymore, obtain copies of your credit report from each of the bureaus and examine them carefully for key information.
- Pick up the phone. Now breathe deeply and start calling your creditors. Let them know that you truly want to rectify damage - explain what happened and propose a remedy. Be calm, honest, and clear. One caveat: tread carefully when dealing with third party collectors. If the debt is still within the statute of limitations time-frame (which varies by state), you could actually prompt a lawsuit. Before communicating with collection agencies, read the Fair Debt Collection Practices Act, a federal law that protects individuals against unfair collection practices.
Set Your Income Requirement
Knowing how much money you’ll need to cover essentials, repay debt, and save for the future is crucial. Find out by completing a detailed savings and spending plan. You will use this figure as an annual salary baseline – simply multiply the monthly sum by 12. For example, if you need $3,000 per month, you’re going to have to earn a yearly net (after-tax) income of $36,000. What can you do to achieve that salary objective? Request a raise, or get a better paying or second job. If your skills and experience are insufficient for a well-compensated position, consider returning to school, obtaining a professional certificate, or interning in your desired field. Before you say, “no I can’t,” recognize that you’ll stay stuck in the muck if you aren’t open to every reasonable option.
Get Credit and Budgeting Help
There will probably come a time during your financial metamorphosis where you feel discouraged. In that event, reach out. There are some excellent organizations that can keep you on your upward journey. Get free money management and debt guidance from a reputable credit counseling organization. They’ll help you set financial goals, develop a budget, review debt repayment alternatives, discuss legal options – and even just listen to you vent.
Praise Your Success
Even the tiniest move in the right direction deserves applause. Put $5 into your savings account? Fantastic; it’s better than zero or racking up more debt. Took ten hours to refine your resume? Time well spent, job seeker. Climbing out of a financial hole is often a draining and difficult process; so congratulate each and every bit of effort you make to ascend. You may not get to where you want to be tomorrow or even a year from now, but with dedicated action you will arrive.
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