When Budgeting And Saving Are Not Enough

So you’re overspending every month, not putting anything into savings and using that “emergency” credit card to buy everyday staples like groceries. Now you’ve opened your eyes and are ready to face the truth, but the advice you keep getting over and over is to cut up your credit cards, get yourself on a budget and put the extra into savings. Right? Well, if this advice works for you then there are probably millions of other articles on the internet right now that can help you do exactly that. But what if you’ve cut those cards, pared down your spending to the bare bones minimum and STILL can’t come up with enough every month to make ends meet, put money into savings or tackle that mountain of debt? If you are in serious financial trouble, being told to budget and save is like telling an extremely obese, bedridden person to cut back on the sweets. It just isn’t enough.

The drastic stomach by-pass solution is to declare bankruptcy, but before you do, consider carefully the legal and life-altering ramifications. Depending on the type of bankruptcy you declare it can stay on your credit report for 7-10 years. That means you better not be planning to buy a house or car or rent a place to live in the next decade. Although it disappears off your credit report, you will still have to own up to it whenever you apply for a job; something that could hurt your chances for getting that promotion. Another problem with this type of “quick fix” is that when you declare bankruptcy, or get a debt settlement, it doesn’t address the issues that got you into trouble in the first place, such as your attitudes toward money and spending, your misconceptions about money, and any emotional factors that go into the way you make purchases. There is a way to get out of debt without declaring bankruptcy, but for some people teetering on the edge of losing everything, it may be too late. Just understand that bankruptcy should be the very LAST thing you do before you flat line.

The real key to success is taking a big dose of reality.  You must analyze the problem from every angle, not just the numbers, but the whole picture.  Why did you buy that expensive house in the first place?  How is it that the payments seemed to work out on paper but not in real life?  Were you counting on a raise that didn’t happen?  Were you not counting on getting sick or injured, or losing your job, or having twins?  Shame on you!  Unless you have a crystal ball that can guarantee your future you should always count on the unexpected.  Do you buy things to make yourself or others happy?  Get to the bottom of this as quickly as possible and then explore other options that don’t cost money (there are tons!)  Did you get stuck in a trap of trying to keep up with the Jones’?  Go ahead and forgive yourself now, but do make sure it never happens again.  Be accountable.  What do I mean by that?  Sell the house.  Sell the car.  Sell anything and everything you own.  Get rid of every mistake you made and set it right.  Then take responsibility for your debt.  Get an extra job.  Get two extra jobs.  Work your butt off until you have paid back every cent that you spent. (Side note here:  if you are getting rid of 80-90% of your debt in a settlement you are not paying what you spent!  Although it’s true that if you’ve held on to debt for a long time most of it could be made up of late fees, interest charges and other accrued fees that the bank has imposed, BE HONEST about how much you actually spent.)

The word of the day here folks is courage. C-O-U-R-A-G-E. Are your neighbors going to notice when that beautiful SUV in your driveway disappears and gets replaced by an ugly, older, barely functioning vehicle with no frills? You bet! Are your co-workers going to demand an explanation as to why you are not going out with them for lunch? Yeeeees. Are the kids going to rebel against your new go-buy-it-yourself attitude? Well they wouldn’t be kids if they didn’t. You’ve done a good job of convincing everyone around you that you can afford the lifestyle you have. It’s going to be a slap in the face to admit that you can’t. Your relatives may get mad at you. You may even lose friends. Your children will have to be taught new and different values. Seem scary? It is.

Again the key is to face reality. The longer you live in denial – oh yes you CAN be homeless – the more likely you are to hit rock bottom. It’s okay to admit that you owe more on your house than it’s worth. Times are hard and you are not alone. So many Americans are struggling it should not be embarrassing to tell someone you are trying to salvage your finances. In fact the Jones’ are probably in the same boat that you are. However, letting the neighbors see the for sale sign 2 years after you moved in is less embarrassing than letting them see a foreclosed sign. Facing the music when it comes to your creditors is less embarrassing than having a repo man show up on your doorstep. Therefore taking aggressive action sooner than later is best, so swallow your pride and do it. If you need help, consult with a credit counselor or financial advisor, but be weary of making any kind of debt settlement because so many of these are scams. If, after taking a long hard look in the mirror you see that all of your financial decisions have been clouded by other things going on in your life, try joining a support group for people with financial problems. There are several good ones that you can join online anonymously for free.

The most important thing is to keep your eyes on the prize. Take some time everyday and imagine what it will be like to live without the constant stress of wondering how you’re going to pay the bills. Imagine what you could do with all that income if you didn’t have to give it all away to the credit card company (I hope you said save it!). And finally, imagine how different it would be to go through a crisis and have enough money to handle the expenses without going into debt. If you can follow through with all of your goals you will see your relationships change and you will change, but only if you make the necessary sacrifices. So go ahead. You can do it.