I’ve provided many tips designed to help you develop power over your finances. This power is what will motivate you to develop the good habits that will keep you out of debt problems. And remember–do not be discouraged by small steps. With most of my tips you’ll see a result in a week or two—stay on track.
Today let’s review some basics.
First, in my bankruptcy practice it is common for clients simply not know where all their money goes. Every month is a matter of just muddling through. But getting present to your finances is a huge step toward getting control. As a first step, actually find out what you’ve been spending—set apart some time and print out your bank records for the last two or three months. Go through them carefully and actually sort out every expenditure by category. And if you’ve been taking my advice, you haven’t been relying on credit cards, so this is your actual money we’re talking about. At this point you’re not making changes—just learning where it goes. This may take a few sittings to get complete, but you’ll see things a lot more clearly once you have your spending mapped to the penny.
Second, map our all your credit cards and other installment payments. List them by name and account number with the balances, interest rates, minimum payments, and due dates. This can be confronting for some people but it is absolutely necessary. Since you’ve already put the cards in drawer you’re now going to develop a plan of paying them down. Start with setting automatic payments from your bank account—so you’ll never miss another payment—late fees can be a big setback. Then concentrate on that card with either the highest interest rate or the lowest balance that can be paid off quickly. Make paying down that one card your highest priorities. When it’s paid, focus on the next card.
Having the exact status of your cards in mind will also support you in your commitment not to use them.
Third, order a free credit report—there are many web sites that will do this for you. But avoid their pitch to pay $15-$20 money each month to “protect” your credit. Reviewing your credit once or twice a year is plenty unless you’ve had some kind of problem. If there are any errors in your report make a written complaint to the credit bureau in in question immediately. They have to respond within 30 days.
Fourth, it is not a sin to negotiate with your creditors. Call them and explain your situation frankly. Make it clear you’ll do everything you can to work with them. Most lenders will agree to a workable plan if you explain your limited options. Have your budget mapped out so you can present a specific option—aim to cut your payment by a third, say from $600 to $400. If you get nowhere with the phone rep, respectfully but firmly ask to speak with a supervisor.
Last for today, a tip that applies to all efforts to get control of your finances, is be on the same page as your partner. Competing interests are suicide. All your efforts could be in vain it you’re not equally committed to your goal. This applies to controlling spending, becoming present to your actual financial situation, and in choosing the steps to regain control. Have a real heart-to-heart conversation, and don’t keep secrets—put everything on the table. A united front will increase the likelihood of making real progress.
Folks, gaining power over your finances is a series of these small steps. But those first small steps can lead to a feeling of hopelessness—a feeling that the problem is so big that nothing can be done. And because we can’t solve the whole problem at once, we often discourage ourselves from even trying. I’m here to encourage you to take those small steps, and to create those good habits, that can make changes in your life—you will see changes in just a week or so. Even if you ultimately have to come see me about a bankruptcy, I want to be sure you’ve tried every possible alternative.
If you have questions about getting control of your finances, or about bankruptcy, visit my website, clarkmiller.com, where you can access my complete archive of Friday Financial Focus shows. Or call me for a personal consultation at 424-1764, that’s 424-1764. Initial visits are always free.