When faced with financial struggles or difficulties, we need to pause and take time out to reflect on what could’ve happened. We may need to re-think and evaluate our financial concerns. Here are few things that we may need to ask ourselves and it might help us resolve and get over such financial difficulties.
Have we determine our financial priorities?
When we are recovering from a personal setback, establishing financial priorities will help us focus our effort and resources. Not all of your household debts will equally impact our families. Our first payment priorities should be bills associated with our essential needs, including utilities, food, mortgage or rent, and insurance. While we may be able to find ways to save on all of these bills by cutting back and negotiating lower rates, paying them is extremely important.
Can creditor hardship programs help us with our credit card debt?
If our debt is all over and can no longer make a better option to pay, we can get professional help by asking the lender for a payment arrangement. Some lenders offer programs to help in re-structuring the debt and payment.
Victim of Identity Theft, made you in the “red” zone?
If there is a suspected fraud activities on your account, do not hesitate to call your bank to investigate. It may take some time for the results, but it will be worth the long process, financially. You can also ask for a fraud alert.
How to keep insurance coverage if become unemployed?
Things that we cannot control happens – in such cases, we need to be prepared. We can check with the insurance provider if we have the right to extend your medical coverage, usually there is. Under these rights, insurance payments will likely be significantly higher than they were when still employed, but they will be lower than similar coverage obtained on our own. Having appropriate health insurance coverage is essential because without coverage, a medical emergency could devastate our finances.
“What is voluntary and involuntary repossession, and how does it affect our personal credit?”
Some loans are secured with collateral, such as a vehicle. If the terms of a secured loan are not met, the financial institution may take back/repossess, the collateral. When the consumer takes the initiative to return the object—before the financial institution takes it—it is called “voluntary repossession.” Both types of repossession, voluntary and involuntary, affect our personal credit in the same way. The only difference is that if we voluntarily return the collateral, we could save on some fees associated with its collection. Either way, the derogatory notation will remain on our credit bureau file for certain years.
Sometimes, we may not understand how credit works for our economy; but mind you, it plays an important role. Without credit, we would not be able to purchase our own house and major possessions. In our lifetime, it is common that we will have various types of credits or loans, and with different lenders. Going for a loan is a huge responsibility, hence, we need to learn how to manage our loans and debt.
We need to recognize when a little debt is too much for us to take. Learn to recognize when little debt is “acceptable” and if it will place you in a potential dangerous situation. For few of us, the “red flags” are clear, but for many, the clues may be vague or unrecognizable.
Perhaps, you can consider asking these few questions, to assess yourself where your debt situation is.
> Will the increasing percentage of your earnings able to cover your debt?
> Is your savings status is not enough or even nonexistent?
> Are you at the brink or edge at the limit of your lines of credit?
> Are you only able to make the minimum payments on your revolving charge accounts?
> Have you been extending repayment schedules – paying in 60 or 90 day bills once paid in 30?
> Are you chronically late in paying your bills? Are you paying bills with money earmarked for something else?
> Borrowing money to pay for items you used to buy with cash?
> In case that you lost a job or no source of income at a certain point, will you be in immediate financial difficulty?
> Do you have an exact figure of how much you owe?
> Are you fidgeting with the thoughts of having your car, house or credit cards that threatens your of a legal action?
If your answers for these questions are “YES”, you should take some time to reflect or assess your finances. While a single “YES” is not a sign of impending financial horror, there may already an indication that you need to make some drastic changes on your financial transactions.
From here, you have to establish personal financial priorities. When recovering from a personal setback, you’ll likely find yourself having to establish financial priorities to focus your effort and resources. Not all your household debts will equally impact your family. Your first payment priorities should all bills associated with essential needs, utilities, food, mortgage or rent, and insurance. While you can most likely find ways to save on all of these bills, by cutting back and negotiating lower rates, paying them is extremely important.
After you decide what your priorities are, review your budget and determine which of your bills are not being fully paid. Contact your creditors to discuss your situation and you want to pay your bills but due to your setback, are unable to. In some situations, you may be able to get a new payment plan.
We have been discussing a lot of way on how to resolve financial concerns and paying off debts. Reiterating here some ways in handling our finances and resolving debt problems… Some may experience different levels of financial mismanagement, from the basic debt problems to the near-bankruptcy, and to the declaration of bankruptcy.
> Assess Your Financial Situation. – Determine your living expenses, other expenses and your regular monthly debt payments. Compare your expenses with your monthly total income. Make sure you know exactly how much you owe.
> Sustain a Realistic Budget Plan. – Create a worksheet to write your monthly expenses. Write where and what you are spending the money for. These expenses can be fixed such as: housing, utilities, child care, loans, etc.; or flexible expenses which vary from weeks or months (unexpected emergencies, medical bills, restaurants/recreation-health activities/entertainment, etc.). Once you see where you are spending funds at, you will have the ability to take control on where you will redirect your expenses at, thus, ability to take control of your finances.
> Recognize the Difference Between Wants and Needs. – Create a healthy budget by taking care of your NEEDS first – food, housing, clothing and transportation. Money should only be spent on WANTS after the needs have been met.
> Never Allow Expenses to Exceed Your Income. – Do some adjustments on your budget according to your income. Evaluate the importance of expensive luxuries such as cell phones, cable TV, or even your designer clothes and other accessories.
> Pay Bills on Time. – Having and maintaining a good credit rating and avoid late charges, which could all the more put you in deeper financial trouble. If you are unable to pay your creditors, call and explain your financial situation and set up a reasonable payment arrangement.
> Use Credit Carefully and Wisely! – Determine what you can comfortably afford to purchase on credit by reviewing your budget. Don’t allow your credit payment to exceed 20% of your monthly paycheck. Pay more than the minimum on charge accounts. Add a few extra dollars to your payment. Avoid borrowing from one creditor to pay off another. Make a conscious effort to use paper (actual dollars available) not plastic (credit cards).
We may have a lot of options in making your financial and funds management work; BUT, it will only YOU who will determine all these plans become a success.
Act on it, make it a habit, and be aware of your spending, at all times.
When one says, “debt” it always connotes of negativity. But, in reality, there are plenty of positive aspects of personal debts. We have to realize that only few of us could purchase a home, car, or attend college without any sort of “credit”. But, you have to make debt work for you, not against you!
Before taking on any personal debt, you need to understand the terms ﬁrst. Of course, it needs to be paid at a certain time table and it goes with an interest cost. But beyond paying the amount, terms of each lender widely varies. And it will be dependent on the type of debt or loan you are taking.
HOME MORTGAGES. – You need to check your capability of payment ﬁrst, how much can you shell out upfront and how much the monthly amortization will be. Make sure you understand the portion of your principal payment and the corresponding monthly interest cost, and for our escrow account. If you will pay more than the minimum amount, you have the option to choose whether the extra goes to the principal, extending your payments or the escrow. But you have to make sure that your lender have applied your payments properly.
CREDIT CARDS. – Make sure that you understand the terms and conditions of your credit cards. And BE RESPONSIBLE in using your card for each purchase. It is really tempting to use your card on all your purchases, remember that there is a high-inters cost that goes with it if you falter in paying on time. And the amount compounds! There are cases that credit card users pay more than the interest from the purchase itself. Paying oﬀ in full on the monthly credit card balance should be your ultimate goal. If you can’t, then put limit on all your purchases.
Also, beware with some of the oﬀers you receive in the mail. There are credit card providers that will mail you checks that can easily be used. BUT, usage of these checks are considered as “cash advance”, which is often has the higher interest costs than the already high cost of regular credit card purchases. If you receive these checks, shred or better yet, burn them immediately to avoid being tempted in using them!
CAR LOANS. – There are diﬀerent loan terms when you apply for a car loan. Though increasing the loan term usually decreases the monthly payments, if you can, try to take the shortest car loan term if possible. Most of the time, car loan terms which is sometimes can go as long as six (6) years, result in owing more money than the car actually worth at some point in your loan. Evidently, it is no longer a practical consideration to take on long-term car loan.
If what you spend is equivalent or even more than the amount you earn, then you need to make a balance between earning and spending. However, it is unfortunate that spending less is not always an option. If you have assessed your ﬁnances, and it may be saying that you need to increase your ﬁnancial earnings, then, it may be the right time to consider looking for other source of income or ﬁnances. You have to know that it is not really as hard as it sounds. With some planning or being resourceful, earning more should not be too diﬃcult.
IDEAS TO INCREASE YOUR EARNINGS:
> ASK FOR A RAISE AT WORK: – Having ideas on how to earn more may not require an elaborate moneymaking scheme! It may only take for you to have a closer look on what you are already earning. At work, if you have been working with the Company for quite some time, then perhaps you can apply for a higher work position, which of course will convert into higher salary. Or, you can simply ask your Company they could consider a pay raise, you have to provide something that will consider them to give you that raise, how you performed at works a big consideration.
> CONSIDER HOME-BASED BUSINESS. – This can be done full-time or part-time. Home-based work is an excellent way to earn extra income. Having work at home and tending on your personal chores is a challenge, just make sure to devote a certain work schedule for the house and “work” at home. See also that you are able to manage your ﬁnances as “self-employed”.
> SELL SOME PERSONAL ASSETS. – Assets are physical acquisitions, such as home, car; monetary property – mutual funds or certiﬁcates of deposit; or intangible rights, i.e. money owed to you by someone. If you what you owe is greater than what you own (your assets), selling some of your assets can help tip the scale in your favor.
> SELL ONLINE. – You may want to consider start an online business or you just want to unload some items that can put additional source of funds, you might want to explore selling online. It is a great place to connect with interested buyers. Just make sure to be aware of legitimate buyers, from hoax ones.
> TAKE LEAD! – A quick search online will open your minds about countless ideas on how to earn money more! From creative extra income solutions that are good in a pinch to longer term solutions for earning additional income. The trick is to pick what you’re interested in and take action. A lot of people panics when they are spending way too high and are not earning much. It is okay, but you can’t allow the feeling of helplessness to overpower you, or you will be ﬁnancially paralyzed. Out there, are countless possibilities to earn extra!
Debt is everywhere, no matter where we look. Regardless of the source of non-mortgage debt, it can take years to pay off. This not only increases the possibility of running into debt fatigue but as well add the amount of interest that needs to be paid over the life span of the debt. But, it doesn’t have to be that way. There are simple ways to cut costs that can give additional funds to cover for the existing debt.
Here are some practical work around or opportunities that can be used to solve debt problems.
> Reduce Monthly Bill – Check the amounts you are paying for your bills. Do comparisons, or ask if you could switch to their going promotions. Or better yet, change to other providers that offer a more savings for your bill.
> Switch to a Zero (0%) Interest Card. – This may not give you extra money, but it will make the money being wasted to pay off debt work better for you. You can also consider debt consolidation to significantly lower your interest payment.
> Reconsider you Membership Cards – Sometimes, membership fees and other payments in joining your club makes such a waste of precious funds. Good example is your gym card, you can substitute gym by jogging along your neighborhood or do some housework to burn those extra calories!
> Rid of your junk! – Look around your house and surprisingly, you will see a lot of things that can be converted into good old cash! Earning few hundred dollars out of your “junk” items should not sound too boring, right?
> Eating Out. – Many of us spend at least extra $20 – $30 per week just to eat in a restaurant or fast food chain. Instead of doing that, the old reliable brown bag sandwich will do some magic to sate your hunger instead of buying food which obviously cost higher. In a month’s time, you will save at least $80 extra!
> Cut some of your “extra” entertainment and energy sources. – Having your internet and cable connections at the same time can rob you out of some money. If you don’t really use your cable connection and you only watch your favorite shows/movies occasionally, you can access those through internet then take the cable out of your system. For your monthly energy bill, save on heater or air conditioner when necessary.
There are many ways to cut expenses that will enable you to divert more money into your debt. The challenge is to be mindful of where you can cut back and convert your savings to pay off your debt. At times, it may require a mile of sacrifice, but it will significantly correct your finances in a way that your debt can be obliterated sooner than you think!
If you owe money from your bank, DO you somehow expect them to automatically take money out of your savings to SET – OFF what you owe them IF you are lagging on your payments either from your credit card or loan/s?
It is a hidden danger for anyone who has credit card, loans or mortgages at the same outfit where one banks or keep the savings. Banks can, and do, use your money to repay overdue debts, which can cause financial hell. Here is a guide that could help one beat this concern:
Know your right to “set-off”
Most of the financial institutions have the right to transfer cash from your bank or savings account to pay off debts held with them. It is known as the right to set-off or to link your accounts. This may not happen to most people, but to those struggling financially must be wary and prepare.
At times, there is a term or condition in your contract allowing it to happen, such as:
“The Bank may, without notice, set off a debit balance, or debit interest, on an account against any account with a credit balance or credit interest held by the same account holder”.
Some firms can add set-off into its contract, in banking and tax, there’s an automatic right to use the procedure. However, it is also important to check with your bank first as sometimes, we tend to overlook the terms and conditions on the contract.
End results of setting – off.
Setting-off can cause various problems – anything that affects how people budget can have long-term detrimental effects. If you’ve money set aside to pay for imminent cheques or direct debits from your accounts, but it’s taken without notice before, your payments to bounce and you to face bank charges. Technically, the rules give wide-ranging powers to banks, way beyond just sorting out unpaid accounts.
How to prevent this to happen?
Best way to avoid this is to keep your debts and bank/savings accounts in separate institutions. It is easier to move savings than debt. If you’re having financial difficulties, go for the Basic Bank Account or check with your local credit union offers current account.
Rules with Banks on setting – off.
You can check on the Lending Code, a voluntary code of practice and most banks subscribe to it, and the rules are binding.
While banks don’t directly divulge before they are going to take your money, they need to inform people of the circumstances of setting off rules.
The bank also need to look into whether you are having or heading to financial difficulties before they take money out of your bank/saving account. They should leave you with enough money to cover reasonable daily expenses and priority debts (mortgage. rent, tax, food bills).
It is always good to know your bank and lender rights, even if you are in debt.