Are you loosing sleep over concerns about your financial situation?
Do you spend part of each day worrying how you will meet your financial obligations?
You're not alone! People everywhere, at all economic levels, have financial worries — too much debt, too little savings — or they're just trying to make ends meet. These problems affect your stress level, your moods and your relationships — both on the job and off. Sometimes, your troubles may seem so deep it feels like nothing can be done about them.
Not true! As with any situation, the first step is to acknowledge there is a problem and something needs to change. The next step is to get some help to resolve the problem.
Advice is a good next step. A meeting with a financial planner can help you investigate all sources of income and total up all your obligations — most will make you bring all your bills with you — and tailor a plan to match your needs and circumstances. Eliminating debt can actually start with some very small steps and strategies you can begin today. In general terms, here are 10 steps you should follow.
1. Get a grip on the amount of debt you have.
You can't overcome a debt problem without knowing how much you owe. Start pulling together every bill with a balance where you're charged non-tax-deductible interest — credit cards and auto loans for a start — and get a total. If you've missed any payments on any of these balances, bring those current first. Then organize the rest of the debt according to interest rate and determine the order to pay them, attacking your highest rate balances first. Also, this is a good time to check your credit reports to make sure there are no other surprises in your credit picture. You are entitled to three free credit reports each year on AnnualCreditReport.com. Any other credit report with the word "free" in its name and asks for a credit card number will likely charge you — avoid those.
2. Put the credit cards away.
Cut up your cards if you have to, but at the very least, put them in a safe place where they're far away from your wallet and your phone or computer (so you don't use them for catalog or online orders). Once your debt is paid off, then you can consider which accounts you will use — sparingly — in the future.
3. Get a grip on spending.
It's time to make a budget. For a month, start tracking your spending — every dime. You can do this on paper or on a computer-based solution like Quicken or Mint.com. As you check the numbers weekly, start identifying things you can live without — coffee and doughnuts, expensive lunches (carryout is a huge budget-buster) and other frills you can cut or eliminate. Once you start to suspect a particular spending item isn't absolutely essential, cut them immediately — don't wait for the end of the month. When you get to the end of the month, build a spending plan to cover the essentials and a few small treats and then direct any additional savings you've identified toward paying off the debt.
4. Try to refinance your home debt.
If you have not recently refinanced your mortgage or home equity debt, see if there's an opportunity to do so at a lower interest rate. You'll need at least 10% equity in your home and a credit score exceeding 740 to qualify for the best rates, but start negotiating with your current lender first and see how well you do.
5. Try to refinance your credit card debt.
If you are facing an overwhelming amount of credit card debt, talk to each credit card company directly to see if you can lower rates or monthly payment amounts. Don't fall for the 2 a.m. come-ons from debt resolution companies — they generally charge high fees and take control of the payment process , which may mean late or missed payments. It's not easy to negotiate a better deal and you may need to insist to speak with several supervisors. But if you succeed at getting a more favorable deal, it's better if you keep the payment process in your hands, so you can keep a constant eye on how your situation is improving.
6. If you need outside help, use some smarts.
The Credit Card Act requires credit card issuers to print a toll-free number for a nonprofit credit counseling service on every bill. It's important to know the credit card companies fund these nonprofits, so they're not acting completely in your interest. Nor are they foolproof in making sure bills get paid on time — any time you let someone else handle your finances you face risk. But if you are looking for outside assistance and negotiation with your balances, these agencies are a better option than those credit repair agencies you'll see advertised on TV. A financial planner may be able to offer specific negotiation tips to help you keep better control of your debt issues.
Try to migrate as much spending as you can to cash as long as you get receipts to help you track spending. A more efficient solution — particularly if you download your bank transactions into a computer program to track financial transactions — is the debit card. Debit cards wearing a bank card logo are typically welcome at most stores where credit cards are accepted. This way, you pay cash without carrying cash. If you don't have such a card, you can probably get one from your bank to replace your traditional ATM card. But remember to tell them to limit your buying power on the card to only what you have in your account. And use overdraft protection to avoid fees.
8. If you can do it safely, do it yourself.
You don't have to pay for a hand car wash or a lawn service if you can do such things yourself. For any home or auto maintenance chores you may have during the year, learn as much as you can about those tasks and how much skill, money and time it takes to do them. Previous generations made do-it-yourself a necessity. See if this option is right for you and you might save a considerable amount of money doing it. Also, for bigger jobs, pair up with friends and family, so you can help each other save money.
9. Plan your shopping in advance.
Impulse buying had its own role in the debt crisis. It's time to stamp it out at least until your debt issues are fully under control. Start making a centralized list of necessary shopping items — keep the list for grocery, discount store, and other locations on one page if you can so you can see everything you're considering. Mark off what seems less than necessary. Use coupons and other discounts — the same goes for online purchases. Always do a search for coupon and discount codes to save money on shipping and overall purchase price. When you can, buy used or recycled clothes, furniture, and home goods, it will save you money, and if you're making smart purchases, no one will care. Again, direct all savings toward debt.
10. At the end of the rainbow, don't restart the problem.
Once the slate is clean, don't start spending again; start saving and investing.
We can help.
Sometimes financial troubles may be caused by a clearly identifiable event, like a recent divorce or the loss of a spouse, partner or job. Other times, financial problems may be related to larger patterns or personal issues which are helpful to understand. Some people feel out of control, not only financially but in other areas of life, as well.
Whatever the cause, a free, confidential phone consultation with one of our financial counselors can help you find possible causes and solutions to your financial problems. There are many options to consider when figuring out how to best address financial questions or issues, or manage your debt.
Areas where we can help include budgeting, financial planning, debt management programs and free unlimited access to web-based financial resources.
Call VITAL WorkLife 24x7x365, for help getting back on track.
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About VITAL WorkLife
VITAL WorkLife, Inc.™ is a national behavioral health consulting company providing support to individuals facing life’s challenges, while also assisting organizations in improving workplace productivity. This approach of helping employees and their families, while also guiding organizations, builds healthy, sustainable behaviors. For over 30 years, we have offered industry leading Employee Assistance Programs, specialized support, training and consulting for a wide variety of industries. Visit us at VITALWorkLife.com.
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