|Aaahhh, I just got home, kiss the kids and my wife, open up the grill so we can start cooking pork chops right away. I take a second to take out my suit (I must admit that flipping meat on a BBQ with a tie is not the perfect match!) and play with my son as we are preparing dinner. The phone ring, I’m exhausted but my wife picks up.– It’s for you, she says with a smile. Since I don’t want to be bothered as I just came back from work, of course it’s for me! So I pick up the phone.– Hey FB, how is it going? Listen, I have a big favour to ask you; I need you to go over my finance. I just got a call from the bank and I need your advices.|
|Regardless the fact that I had a bad day at work, one of my friend needed help to put his finance back on track and I was certainly not the person to say no. Unfortunately, there are too many people that are too pride about their finance or think that is taboo. Therefore, they are left alone with their mistakes and they try to fix it. Have you ever tried to fix your car when you don’t even know where your spare tire is? Well, it’s about the same thing if you are trying to take over your personal finance without knowledge. You have much better chance to cut down the brakes and end-up on the roadside than anything else! About six months ago, the same friend asked me the same kind of help. Back then, his situation was terrible. In fact, I was praying so he does not ask me for money. Which he did not, fortunately! Instead, he showed me where he were at and ask me for my advices. He wanted to know how to manage his budget, get his debts together and finally hope to get out of it. Here is what I told him.
Win some time
My friend was really indebted and just started working. Obviously, he didn’t have much into his bank account and was carrying over 20K in student loans. He also moved after he finished school and owe three months of rent to his ex-landlord. He could not afford to make all his payments. He was purposely ignoring his creditors’ phone call in regard to his debts. On he side, he simply thought he would work out something and then call them back with some money to offer. This is definitely the worst thing to do. When you realize that your wallet is shrinking, the best thing to do is to call your creditors and take an arrangement. You should make wait everybody that will not likely report it to your credit bureau right away. Electricity companies do not systematically report your account to credit reporting agencies. It is the same thing with cell phones, internet and cables account. In his case, it was also applicable to his ex-landlord. You can also negotiate on your student loan, financial institutions are more lenient on them as you must pay them off one day. The important part is to show good will (and seriously be sincere, if your not, stop reading this post right now because it will not help you). It’s in the best interest of all to find a compromise; as long as you are willing to respect it.
Prioritize your debts
You have a limited income that is smaller that your debt repayments requirements. Once you have win some time with creditors, you have to prioritize your payments. Your first payment must go to your credit credit cards as they will report any late payments right away. Paying the minimum on each card is enough to keep them at bay. Then, you need to eat and live somewhere. You can not cut on those expenses. After that comes all the other financial obligations related to a financial institutions such as personal loans, flex lines or leases. If you have money left, you need to put is towards the creditors you made arrangement with. Sending them a small amount of money will keep them happy (they are already considering your debt as a loss at this point) and will convince them to not take further action in your case.
Get another job
When you are crumbling below a ton of debts, you have very limited options. You can borrow money from a friend or family, from the bank (which is most likely not going to happen due to your present situation) or work harder. My friend could not apply for more credit at the bank (he even tried a credit card with 0% interest on transfer and got refused). I was dedicated to help him out but I was definitely not ready to lend him money. Teach people how to fish instead of feeding them. This is an old but so true rule of life. So my friend got himself a night and weekend job in a fast food restaurant. It’s easy to get in as their turnover ratio is enormous. Just apply to three or four of them and you’ll get a second job in no time. While it was painful to work 60-70 hours a week, he was now able to make his payment. On top of that, he was able to make more money than he expected because of the night shift premium.
A few days ago, when this friend called me, he went over my place and we looked at his finance once again. Within only six months, he took care of his credit cards balances, his three months of rent and all his other bills are up to date. He had to work like a maniac for four months but he went through it with a great success. In addition to that, even if he did not have much time on his own, he found himself a girlfriend who is the sweetest things on earth. She is building is own house and they even might move together next spring. The only thing remaining is his student loan balance and then he will be able to start saving and investing. So as you can see, there is always a way out and if you are ready to make enough sacrifices, you will earn your piece of the cake.
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