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Loading ...The bills are piling up, but your checking account is already overdrawn. Your clunker just breathed its last breath on the highway, and the garage wants $50 (that you don’t have) to tow it to the dump. Your friendly banker is calling to find out why you haven’t paid your MasterCard bill in two months. What do you do?
The first thing you must do, before you do anything else, is to decide you will take responsibility for your debt. That may not be an easy thing to acknowledge, but as long as you feel your debt is out of your control, you’ll never get rid of it. Decide right now that you, and only you, can take responsibility for your debt. Realize that whatever the cause of your situation, finding a solution is up to you . . . no matter how difficult or impossible that may seem.
You’re going to have to find the money to pay off your debt. Don’t count on an inheritance, lottery ticket, or debt consolidation loan to erase your bills. Instead, take a good, hard look at what’s going in and out to find out where you can make changes.
If you have addiction or mental health problems, you must address them first before you can realistically expect to be able to control your debt. Don’t be quick to brush off the idea that you may need help that does not seem directly financial. In 2005, Myvesta.org conducted a survey that found that 49.3 percent of people with debt problems can be classified as depressed; and of those, 39.7 percent report symptoms of severe depression. In comparison, studies have shown that about 9.5 percent of the general population is clinically depressed. If you suspect that you suffer from anxiety, compulsive spending, or depression, get help for it first. Myvesta.org can provide help or referrals, or you can also talk with your physician.
If you do not have those other issues to deal with, or if you are getting help with them, you have some practical work to do. Most importantly you need to understand that you can control two things: how much you spend, and perhaps to a greater extent than you realize, how much you earn.
If your bills total $1,000 a month, but your income is only $950 a month, you’ve got a serious problem and you need to do something about it sooner or later.
If you don’t feel as though you can face it alone, ask a trusted friend to sit down for a few hours and help you figure out your finances. A relative may also be able to help—but only if he or she can be supportive without telling you what you should do!
Order Your Credit Report If you haven’t seen your credit report lately, get a copy immediately. One of the key steps to weathering a financial crisis is knowing how it will affect your credit report and your ability to get credit in the future.
Figure Out if You Can Pay Next, write down all your bills, their minimum monthly payments, due dates, and your income for the next few months.
f you can make all your minimum payments, then you’re in the clear—at least for the time being. You will have to watch your spending very carefully, but you should be able to get through this crisis without too much long-term damage to your credit rating or nerves.
Don’t forget to review your resources. Can you borrow against your house or your retirement plan at work? Do you have a relative who can help you out until this crisis is over? Are there things you can cut back on or give up for the time being?
Get Professional Help If you can’t meet at least your minimum payments, you may need help from an organization such as a nonprofit credit counseling agency like Myvesta.org, which specializes in helping people in financial crisis, or an organization like the Financial Recovery Institute.
If your “outgo” is much larger than your income, and things look really bleak, consider bankruptcy. Bankruptcy is a serious step and not one we recommend lightly, but it can be a legitimate option for those who really need a fresh start.
Find Out How Bad the Problem Really Is