Saturday, December 08, 2012

Why Are You Living a Lie



                                                         

Does this describe you?  You don’t have money to pay your bills or you use your cable money to go shopping or go on a trip.  Then when someone asks you about your finances you say I don’t have any money.  Maybe if you didn’t spend $300 on a purse or $500 on a trip and paid your cable, rent and utilities you would have the money you need to pay your bills and a little extra left over to pay down debt or contribute to a savings account.

Each time you swipe your credit card and you don’t have the same amount of money in your savings account you are living a lie.  Each time you apply for a loan and you have a negative net worth, little to no retirement or savings you are living a lie. Each time you miss paying a credit card bill you are living a lie.  Each time you go into debt to buy gifts for Christmas and you don’t have the money to pay the bill when it arrives in January you are living a lie.

Getting approved for credit means that you agreed to borrow money and pay it back on the terms and conditions of the credit card.  If at any time your financial situation changed you should have stopped using the credit card and focused on paying back the debt.  Instead, you continued charging and didn’t think about the consequences.  Now you are in trouble and are trying to figure out how to pay back the debt.  This lie leads to filing for bankruptcy or foreclosure or having judgments or repossessions, bad credit and difficulty finding employment.

The first step to getting out of debt is to be honest with yourself. Next you need to be honest with the people around you, your friends, family, co-workers, anyone who you are in constant communication with including your creditors and let them know you are struggling with your finances. The worst mistake I made when I became unemployed and got behind on my bills was not telling anyone about my situation and not reaching out for help. Once I admitted to myself I had a problem and admitted it to those around me, I began to get help and was eventually able to pay off all of my debt and start a business helping people do the same.  Here are 9 ways to stop living the debt lie:




  1. Pay in full. Pay credit card balances in full each month prior to the due date or as soon as you receive the bill which helps to avoid paying finance charges and late fees.
  2. Pay above. Pay more than the minimum monthly payment.  This will help to pay the balance down faster.
  3. Pay more than once. Send payments multiple times a month.  You can pay half of the bill balance with 1st paycheck of the month then pay the remaining balance with 2nd paycheck of the month. Pay weekly instead of monthly. Pay the minimum monthly payment the first week after you get the bill, and then each week pay as much as you can toward the monthly balance and repeat every month.  You can also pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.
  4. Buy less. Spend less than you earn.  Control your spending, keep debt excluding mortgage or rent at 15% or less of your total monthly income after taxes. Reduce expenses by bringing your lunch to work, taking public transportation, shopping at wholesale stores and downsizing. 
  5. Pay with cash. Use credit cards for emergencies only. Use cash to pay for purchases. 
  6. Create a spending plan. Create a budget or spending plan to quickly identify what you spend, what you earn and what you owe.  This will quickly show you what areas you need to reduce spending.
  7. Get Current. Contact your creditors and negotiate with them to setup payment plans to pay late accounts.  If possible, pay judgments, liens and collection accounts first because they weigh more heavily on your credit score.  If not, start by paying off the smallest bills first, then use the money paid towards a previous bill and apply it to the next bill and continue this process until all your debts are paid.
  8. Create an emergency fund. Work towards saving at least 9-12 months’ worth of monthly expenses in a savings account to cover unexpected expenses. 
  9. Sell some items. Sell some assets such as jewelry, a second car and clothing, shoes, appliances or hold a yard sale to sell unused items. Use the extra cash to pay down debt.




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