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Filling Debt Holes

 

Digging debt holesAre you digging one "debt hole" in order to fill another?  Many of us, including our government, are dealing with poor budgeting skills, poor spending habits, illnesses, job losses and so on, that have created the many "debt" holes that we are now trying to fill.  Only, there is nothing left to fill the holes.  Or, maybe you're in the category that, with some organization, you can get back on track and begin refilling those holes in a way that will benefit you and your family's financial future.

 

Family Life Resources, Inc. makes every effort to help you determine a plan of action for your financial future.  We strive to offer services and resources to help you not only understand your financial situation but to also help you improve it.   Even if you believe there is nothing we can do, we can still do something.  We can give you tools for the future.  Jer. 29:11 promises us a “hope and a future.”  With that as our guarantee in life, FLR is then confident in being a part of that promise.  Although you may not see immediate results in your weekly budget, you will begin to see the peace that is promised and you will be able to move forward into the future that is there for you.

JUST A LITTLE NOTE ON CREDIT REPORTS FROM FLR!

 

 

JUST A LITTLE NOTE ON CREDIT REPORTS FROM FLR!

Credit ReportsYou've got questions and we've got answers.  Your goal is to improve your financial situation.  Our goal is to help you do so. 

When it comes to finances, our credit reports contain a financial history of how well we handled our business with various creditors and lenders.  Are you consistently on time?  Are there past due accounts?  How do you take care of balances on collection accounts?  How do you even understand the credit report in the first place?!!

CREDIT REPORT REVIEW SESSION

Dealing with finances is overwhelming.  Is there an easier way?  Yes! Talk with a Certified Credit Counselor.  Become financially savvy and take the time to review and understand your credit report.  Get assistance in developing a financial plan from people who understand and will offer no judgment of the "why are in you in this situation" but will instead assist you in improving your situation.  There are no fast fixes.  Our goal is to help you get financially healthy and improve your ability to care for yourself and your loved ones.

QUESTIONS YOU MAY HAVE RIGHT NOW

  • How can you get a credit report from those who manage it?

It’s a good idea to look over your credit report at least once a year.  Check a current report also before making big purchases, such as a home or car. 

There are three major credit bureaus and hundreds of small credit agencies that collect and maintain your personal and financial information. These corporations make money by selling credit information.  Consumers are entitled to a free credit report every 12 months.  This does not include scores.  In most cases, there is a fee to obtain your scores from the three bureaus.   

 To request a copy of your credit report, contact the credit reporting agencies directly:

  • How does your information get on the credit report?  The moment you apply for credit, the lender contacts the credit bureau for your credit information, which adds to your credit history.  Additional information may come from public sources, such as bankruptcy records, liens, etc.
  • Who can see the information on your credit report?  Legally, any of the following can review your report:                  

                    -  Creditor or lender where you have applied for credit
                    -  Potential employer
                    -  Mortgage lender where you applied for a home loan
                    -  Apartment complexes
                    -  Current employer on a need-to-know basis
                    -  Person, firm, or agency who has your permission.
                    -  Person, firm or agency with a legitimate need to know
                    -  Insurance company when you apply for any type of insurance
                    - You, as a consumer       
  •  How can mistakes get on your credit report?  It is most important that you frequently check your report, especially to see if it’s correct.  It’s reported that over 50% of credit reports have major errors.  These errors could cause you to pay higher interest rates and sometimes lead to credit rejection.  If your report contains errors, it is often because the report is incomplete, or it may have someone else’s information.
  • You may have applied for credit under different names.
  • A mistake may occur when entering your personal information, such as the address or Social Security number on the report. 
  • Another mistake may be that a loan or credit card payment was applied to the wrong account.
If you find an error, the credit reporting agency must investigate and respond to you within 30 days.  If you are in the process of applying for a loan, immediately notify the lender of the incorrect information on your report.

THIS IS JUST A START

The above information is great general information to help you better understand the life of a Credit Report.  In order to get personal and develop a plan to help you meet your financial goals, follow up with FLR, schedule a Credit Report Review Session and get on track to financial health.  We love to see success!

HOW TO BE A RESOURCE WITHOUT GOING INTO DEBT YOURSELF

 

Family helping family (and friends)

Family helpingA grandmother helps her daughter, who is jobless and going through a divorce.  Also, she helps to care for young grandchildren by using her gas and resources as well as provide for the needs of older grandchildren who are in high school and college.  Now, grandma is having financial problems as well. 

The death of a father and husband upsets the delicate Peter/Paul balance he had in managing the family’s finances.  Now, a mother and her college age daughter have to figure out how to unexpectedly make it financially without him and his salary. 

So many financial events happen in our lives.  In many cases, it doesn’t happen in a vacuum.  One family member’s problem can affect other family members, especially when they have not reviewed their resources prior to offering their financial help.

How to be a resource without going into debt yourself

There is absolutely nothing wrong with family helping family (and friends).  Sometimes, that help has made it possible to maintain until the current financial situation improves.  However, in these economic times, financial stresses can last longer and the person helping may end up with financial problems of their own if they are not carefully monitoring their budget and financial situation.  As a Certified Credit Counselor, I often have parents, grandparents, sisters, brothers and friends who have sought our service because they are now in financial distress after helping someone else in financial distress.  So, how do you become a resource without getting into debt yourself? Here are few pointers:

·     Know your own budget before helping others. You may be willing to offer $100 to help someone but does that mean your electric will be late or not paid at all?  Get out an Income & Expense form, complete it in detail and determine how you can practically help meet their needs as well as your own.

·     Find out the true situation.  Is this an ongoing experience?  Is Uncle Ed always in financial trouble and refuses to do the right thing?  Sometimes it’s not the economy or a crisis.  Sometimes, it’s just poor choices.  Don’t let someone’s bad decisions affect your good ones.

·     Will helping them affect your savings plan?  Remember, you are not a bank.  If your savings, retirement or everyday expenses are diminishing, you and the person you are helping may need to look at alternatives for helping them through their financial issues.  It is better you become a resource to help you both learn better financial skills.

·     And let’s not forget student loans.  Parents, this one’s for you.  Take Parent Loans for college off the table.  When the loan comes due, in many cases, the student cannot afford to pay…and neither can the parents.  The difference is that you have more stuff than your child does and the lender can (and will) come looking for it (ie. a lien against your home, wage garnishment, etc.).

One more thing....

Psalm 112:5 - It is well with the man who deals generously and lends; who conducts his affairs with justice.

Lending (or giving in most cases) is a natural act when it comes to those we love.  As a matter of fact, we tend to follow scripture in that we “…lend, expecting nothing in return.” Luke 6:35.  With that in mind, give freely.  But I would also throw in, be wise.  Find the balance and do the work of ensuring your finances are in order so that you can continue to help your “brother” put their affairs in order.  Before giving money, remember these practical steps:

  1. Develop the budget,
  2. Determine what you can practically give and,
  3. Give without expecting anything in return.

Make use of the many resources available to help with budgeting, employment, student loans and other financial issues.  Follow up with us.  We’d be glad to offer you and your loved ones the help they need towards getting their financial footing again.

4 Reasons Not To Borrow From Your Retirement Fund

 

Will the year 2013 be a better year for you than 2012? For many, personal finances will continue to be the "elephant" in the room. More people borrowed money from their retirement fund last year to make ends meet. For some they have been laid off and needed the extra money just to get by. For others, they fell behind on mortgages or needed the money for college tuition. What ever the reason, the cost of borrowing from your retirement is high and unless you have a way to replace the loan, you may find your lifestyle in your golden years less appealing then expected. Unfortunately, this trend is continuing in 2013.

Here are four reasons NOT to borrow money from your retirement fund:spending more money than you have

1. Borrowing money to make ends meet while you still have income is avoiding reality.

If your income is not enough to meet monthly expenses then you need to look at your cost of living and make adjustments. Keeping up a lifestyle and hoping additional income will become available down the road cannot be sustained.

2. Those that encourage you to borrow from retirement may make money off your decision.borrowing money blog2

Be careful about advice you receive. Remember each family is different and what worked out well for others may not be in your best interest. Also understand there is a cost to borrow your own money. Your taxes may increase due to the increase in income, there may be a penalty for cashing out your retirement or you may need to pay someone a commission depending on the type of retirement plan you have.

3. There may be penalty or hidden costs to borrow from yourself.Penalty for borrowing  money from retirement

When you make an investment into a retirement plan such as a IRA or 401(k), the money is not taxed until you withdraw it. When you add the 10% penalty for withdrawing the money early, you have not only lost some of the money you were hoping to have BUT have also lost out on the possible investment money you could have earned if you had left that money in the account. In some cases, you also have to pay the money back through a monthly payment plan. Can you add that expense to your budget without difficulty?

4. Making up is hard to do.Trying to make up loss income

To make up the loss of investment income and replenish the account, you will need to increase your savings in the future. You are gambling that the future will be better then your past. In today's economy, that is a huge gamble.

Sometimes borrowing money from your retirement fund is necessary. So, what is the alternative if borrowing from yourself is not the answer? Start by identifying the reason you need to borrow.

Meeting with a professional certified credit counselor can help you determine the best action for your needs. We at Family Life Resources, Inc. can help you assess the issue and create a plan of action to determine your next steps. We encourage you to build a budget of your current lifestyle so you understand where you are at financially at this time.

FREE EDUCATIONAL COURSE ON BUDGETING!!!

CLICK HERE and fill out our form to download a free educational course on budgeting that will help answer your questions and provide a budget template for your use. This course is FREE....so take advantage of this information to help you have a better financial year in 2013.

4 Reasons To Review Your Credit Report...Now

 

1. NON-LENDERS USE YOUR CREDIT INFORMATION TO MAKE DECISIONS ABOUT YOU.

check your credit report resized 600

The information contained in the report can affect many areas of daily living that have little or nothing to do with the extension of credit.  Car insurance companies, landlords, prospective employers and a host of other enterprises may use your credit history as a basis for setting rates, giving you a job or renting you an apartment. 

 

  2. MANY CREDIT REPORTS CONTAIN INACCURATE INFORMATION.

It is up to you to determine if there are errors on your credit reports. Any errors These make up your credit scoreshould be disputed in compliance with the credit reporting bureau. Negative errors on your report can have a huge impact on your ability to get credit. 

 

  3. A DETAILED CREDIT REPORT REVIEW MAY UNCOVER IDENTITY THEFT.Identity Thief

Unknown entries on your report may be the result of an honest mistake or it could be evidence that someone is trying, or has tried, to use your name or social security number to open credit lines or steal your identity. The FTC has a step by step process to follow to help report and repair the damage to your credit image. 

 

4. CERTAIN ENTRIES MAY ALERT YOU TO LEGAL ACTIONS.

Legal actionYou could be facing tax liens, mechanics liens or other legal actions of which you were unaware.  Public records filings (where you are named) are contained in a section of the credit report and lists those items when reported through the courts and other agencies.

 

 Don't be caught unaware!!! Know your credit score and have the knowledge you need to make your financial plans for 2013.

When you use the services of a Certified Credit Counselor to conduct a Credit Report Review, you have the advantage of someone who can explain the layout of the report, the codes relating to each entry and actions that you may take to improve your credit file and ulitmately your finances. Click here to fill out the form and receive a free copy of the FTC's "Taking Charge", which will offer steps you can take if you have been a victim of identity theft.

5 Financial Actions to Take Now That The Elections Are Over

 

secure your financial futureTwo million dollars and two years later the election is finally over. Nothing has really changed in the makeup of our government and our nations finances are well...a mess! Hopefully, attitudes will change so issues can be resolved for the betterment of our nation.

With this said, many of us are wondering what our next steps should be regarding our own finances. This is not the time to be the proverbial ostrich with the your head in the sand.  It is important that you, as a consumer, take the necessary steps to control your own spending and to get better at monitoring and maintaining your finances.  Doing this means taking the time to actually look at your finances under a magnifying glass and taking a hard look at your financial habits.  By doing so, you become organized and can better handle any financial changes that come along. 

To get you started, here are some actions you should take to ensure your financial security. They are simple habits to initiate and will make your life better no matter which party you supported.

  1. Unemployment is still high and probably will remain so for a while. Review your income and your monthly expenses to determine if you are leaking money. People were not prepared for the downturn in the economy in 2008-2009. They were caught with large debt and large lifestyles. Don’t make the same mistake. Be ready should your job disappear or your income drop.
  2. Live within your means. We have spent decades living beyond our means and using credit to fill in the income gaps. Instead, start setting aside money towards an emergency fund to help you through a crisis situation. And, new tires for the car will not be an emergency if you save for them now.
  3. When you are ready to buy, do your research. Whether it is for that new car you want or the newest electronics, the internet has made it easy to compare and shop prices and quality. Make your selections wisely and have a budget in mind before you buy.
  4. Be ready for increasing prices. Gasoline, food, utilities and taxes will start to rise so your income will need to stretch farther. Build in a cost of living indicator into your budget. Also look for ways to stretch your dollars by couponing and looking for sales. Buying in bulk can reduce the unit price per item. Families can go in together to buy bulk to help reduce initial expenditures.
  5. Save for retirement. Easy to say but difficult to do when you have a young family that seems to consume all of the income each month. While you may not be able to now, as your children grow older and your income increases, don’t continue to live on what you make; live below your means.

The above guidelines have been used for decades as tried and true methods of handling your finances and to ready yourselves for crisis situations when they come. By following these suggestions, you gain the control!  You begin making the demands on your money instead of the commercials that offer you the next more expensive gadget.  Preparation is key!  These two quotes sum up the situation:

We all know Ben Franklin: “By failing to prepare, you are preparing to fail.”

And this one from Randy Pausch, author of  The Last Lecture.  Although a little different, he brings the point home by stating, “Another way to be prepared is to think negatively. Yes, I'm a great optimist. but, when trying to make a decision, I often think of the worst case scenario. I call it 'the eaten by wolves factor.' If I do something, what's the most terrible thing that could happen? Would I be eaten by wolves? One thing that makes it possible to be an optimist, is if you have a contingency plan for when all hell breaks loose. There are a lot of things I don't worry about, because I have a plan in place if they do.”

So take the time. Review your finances. Fine tune them. Put a plan in place. Follow up with Family Life Resources, Inc. and speak with a Certified Credit Counselor who can help get you on the right financial track.

Spending Categories: How Much Is Too Much?

 

Spending categoriesYou can take five families that make five thousand dollars a month and they will each spend that money differently.  In many cases, those spending patterns were a decision made without much thought of how those monthly payments will affect the family three years from now.  Coupled with that, the average American family spends about 15% more then they earn.  It is no wonder the downturn in the economy has devastated so many families.  They just did not have the financial resources to handle any unplanned financial crisis.

So, how can you stop being a victim of your own financial decisions?  By paying attention to your finances.  A good place to start is by understand and develop your "Spending Categories."  Each of us only has so much money to live on and, whether you have a mortgage or rent, make car payments or ride the bus, buy groceries or eat out, everyone has certain categories in which they will spend money. 

Remember, we are speaking of net spendable income; that is, your actual take home pay.  If you have money taken from your paycheck each pay period to cover say, your car payment, be sure to add those expenses to its proper category.  Let's look at some of those categories and consider what the guidelines suggest and compare them to your current financial categories:

  • HOUSING - How much are you spending in this category?  Is it 38%, 50% or even higher? Generally speaking Americans spend about 38% of their income on housing. This includes taxes, utilities (cable, internet, electric, gas and telephone) as well as house or renters insurance and maintenance.
  • TRANSPORTATION - Usually,  you can plan on spending around 15% of your income on transportation. Owning an automobile requires more than just putting gas in every week.  Regular maintenance and repair should be taken into consideration. You should include oil changes, tires, and batteries as just a few of the upfront expenses found in this category. If your driving record has a blemish, even car insurance can take up a large potion of your paycheck. Do you pay to park or take toll roads?  These fees should be included in the transportation category as well.
  • FOOD - This is another category that requires a major potion of your income, around 12%.  This  not only includes money spent at the grocery store but also money for lunch, and snacks. My friend would stop every day for a frozen drink at the gas station. It was only a dollar a day but that ended up costing $30.00 a month. She often had her children with her so she bought candy for them. For those of us who love Starbucks, we can easily spend $30.00 a week. Those little items can add up and blow your grocery budget (and the rest of the budget as well).
  • MEDICAL INSURANCE - Until we get sick or suffer some sort of injury, we tend to put this category aside.  Medical insurance, for some can be an expensive item. Most spend about 5% of their income on medical expenses.  However, others, such as my friend spend $1500.00 a month out of pocket for medical insurance.  So, it really depends on your needs, family size and if there is an illness to be concerned about.  For those with ongoing medical issues, you will need to adjust this category to a higher percentage.
  • CLOTHING - Clothing is an area most people do not keep track of throughout the year. One can expect spending around 5% of your income on clothing, but that could change depending on the age and number of your children, expected dress for work and region of the country where you live. Colder climates require heavier more expensive clothing than that required by the Sunshine State.
  • RECREATION - Eat out lately?  Rent a video?  Recreation is another area that is not closely tracked.  You can expect to spend around 5% of your budget in this area but many families spend more. This category includes vacations, sports, hobbies, eating out and events. Children’s sports can be very expensive especially if it involves overnight stays in hotels etc.  This is definitely an area to pay attention to.
  • OTHER CATEGORIES TO CONSIDER - You should not be sending more then 5% on credit card debt. The best way to free up money is to pay down your debt.  Gift giving is another category that is not tracked by most people and can have emotional ties.  Christmas is just one holiday. There are anniversaries, birthdays and graduations gifts as well. A 5% budget for this category is in line with national averages.  While this is listed last, it should come first. You should be saving at least 5% of your income for emergencies and another 5% for your retirement.

Let’s look at a family bringing home around $5000 a month. How do these categories break down?

Housing $1900.00 a month including taxes and insurance
Transportation $750.00 a month including insurance ( putting money aside for car repairs)
Food $600.00 a month
Medical expenses $250.00 a month
Clothing $250.00 a month
Recreation $250.00 a month ( remember you are saving for a vacation)
Gift giving $250.00 a month
Debt $250.00 a month
Savings 500.00 a month
   

How does your budget stand up to these guidelines? By not paying attention to these categories, you will affect your financial lifestyle in a negative way.  For example, buying too much house, accumulating too much credit card debt or just simply paying overdraft fees and late fees all of the time can devastate a budget. Before you can manage your money you must know your current spending pattern.

Contact Family Life Resources, Inc. and speak to a Certified Credit Counselor to help you resolve financial difficulties.

How Much Is Too Much Debt?

 

How much debt is too much?How Much Is Too Much Debt?

Realistically we can expect to have some debt as part of our financial picture. The question is how do we know if we have too much debt?  You cannot judge this just by the amount of debt alone.  What can seem a manageable amount for one person may be too much debt for another.

While credit card debt is the usual culprit, any debt can spiral out of control.  In the last few years, a once affordable home grew from a dream home to a nightmare due to mortgage payments increasing because of increased taxes, increased home insurance rates or it decreased in value due to the housing bubble that burst and left many with underwater mortgages. 

The best way to gauge your debt is to look at your debt to income level.  A debt to income ratio is determined by the combination of all of your debt compared to your income level.  By calculating these figures, you can determine if you are headed down the road to financial stress.  To calculate your debt to income level:

  • First add up your total income.  This includes income from your job, child support, benefits, pensions and any government assistance you might receive ( ex: food stamps) as well as any support money received from family and friends.
  • Next, calculate your monthly obligations.  This would include your car payment, mortgage payment ( including taxes and insurance), credit card payments, student loans payments, and any other monthly bills including utilities.
  • Then, divide your monthly debt total by you monthly income total and multiply that number by 100 to calculate your debt to income ratio.

Now, use this guideline to help you gauge your current financial standing:

Your debt to income ratio is less than 35%.  You are in great financial shape. You have money to set aside for emergencies and investments which can help you keep your debt to income level low.

Your debt to income level is between 35% and 45%.  This is an acceptable amount of debt but a major purchase such as another car would put you over the edge. The more wiggle room you have the better off you are to offset any unexpected expenses.

Your debt to income level is between 45% and 50%.  You are on the verge of financial distress. You have no wiggle room left and any financial crisis such as a major car repair can have devastating effects. Now is the time to address this issue and make sure you do not add to the debt load. Contact a Certified Credit Counselor to help you find resources to better manage your debt.

Your debt to income level is more then 50%.  You are in a financial emergency. You can not continue to carry this debt load and have a secure financial future. You will need to look at major changes in how you manage your money that might include taking on a second job, selling your assets to pay down debt or perhaps you may need to file bankruptcy if you do not have the resources to increase income.

What does the debt to income level really mean? It is a gauge to how well you will be able to handle a financial crisis, plan for retirement and adjust to increases in cost of living expenses such as gasoline and food. In essence, it determines how financially healthy you are today and for the future. If your debt to income level is too high, take action now. Contact a Certified Credit Counselor and take the necessary steps to start on the road to financial recovery.

5 Tips for Lending Money to Family and Friends

 

 5 Tips for Lending Money to Family and Friends

lending money, debt, counseling, loan, loansThe question of whether you should lend money to family and friends is never a resounding yes or no.  The business side of the decision is probably a no since there is not a real contract between the two parties.  If the “borrower” decides to default, it can put the "lender" into a difficult position of being the 'bill collector."  However, the emotional side of wanting to help a friend or family member can negate the practical side of business.

For example, Nancy wanted to help her daughter, a single mom, who had been laid off.  Her daughter needed money for rent, car payment and food. Unemployment did not cover her total monthly expenses.  Nancy’s concern was for her grandchildren’s welfare and did not want to see them suffer during this financial crisis.

Nancy’s daughter often had financial issues and had a history of not being able to repay her mother the money loaned to her.  It is not that she didn’t want to but, she simply made just enough money to get by and not enough to cover any crisis that might occur, let alone to repay a debt.

This is not an unusual situation for the X-Generation.  With the recent downturn of the economy, adult children are seeking more financial assistance from their parents.  Not only that, this financial support, in many cases, has become long term.  For many of these parents, it is the grandchildren they worry about and want to keep from suffering.  Purchasing school clothes, school supplies, school tuition and extra curricular activities are just a few of the ways grandparents provide support.  It is important to be aware that lending money to provide financial support, start a new business or to help with the grandchildren can certainly be helpful; but one should also be aware that taking this avenue can lead to misunderstanding and an unraveling of the relationship between parties. 

Here are some tips to consider before lending money:

  1. Make sure you have the money to lend.  Don’t put yourself in financial crisis in order to save someone else. That means you must know your financial situation.  Will you need to pull money from a retirement account, savings or checking?  What consequences will you incur in order to gather the money to lend?  What will happen if the borrower can’t repay the loan as agreed?

  2. The best laid plans of men sometimes don’t work out.  Loans to help start a new business, pay off debt or simply tie one over for the month are taken in good faith but, life happens and the loan is not repaid as hoped.  How will this change your relationship with the borrower?  Can you overcome this setback with a smile on your face and not become angry of the situation?

  3. It might be best if you treat this loan as a business transaction.  Write a contract that shows how much is borrowed, any interest to be charged, and how the loan is to be paid back.  Have witnesses and get it notarized!  If necessary, use an attorney.  Above all, keep it official and businesslike!  This contract will help alleviate any misunderstanding that might arise from “I thought you meant…”.

  4. Perhaps instead of a loan, make it a gift.  If you can financially handle it, a gift can be a real blessing to family in financial need.  Make it very clear upfront that you don’t expect the money to be repaid.  Also realize that once you give the money, how the borrower chooses to spend it is out of your control.  They may want it for one reason but spend it in another way.  The money is now theirs to spend as they see fit.  You can’t judge how they spend it.  You can however, vow never to lend (or give) them money again.  That is your right.

  5. Say no to the habitual borrowers.  Especially if they never repay the loan.  Offer instead to pay for financial counseling to help them overcome the behavior that leads them to continually borrow money.  Habitual borrowers can take advantage of you to the point where your relationship is affected and it is better if that does not happen.  If they do not want counseling, that is their choice.  Just let them know that it is not in your best interest to loan money to them.

Wanting to help friends and family is a natural instinct.  If you are not comfortable in making the loan, don’t do it.  You do not need to be the “bank” for the people in your life.  If however, you have the financial capacity and want to help, then by all means do so with practicalities in place.  Also, be prepared that the loan might not be paid back.  And never, never, never co-sign for someone.  That is for another blog!

Images Credit: www.FreeDigitalPhotos.net 

Are You Hiding From Your Debt?

 

Hiding from DEBT DEALING WITH DEBT

There's that pile of envelopes on your kitchen table and it's been there awhile.  Or, maybe you are into online bill pay (and saving the environment) but you keep editing the payment and resetting it from $50 to $10. The original plan in both instances was to get organized and get out of debt.  Somehow, it is still out of control.

If you are hiding from your debt or even (heaven forbid!) playing possum, then let us help you come out from under the fear that has you bound.

OPEN THE LETTERS!

This may seem like a simple step and kind of obvious but yes, you need to OPEN THE LETTERS.  There have been several clients through the years who have come into the office with stacks of unopened mail.  The fear of what creditors may or may not do is a very valid fear due to lack of knowledge of the process.  However, not dealing with debt will not make the debt go away. Eventually, one of them will be willing to take you to court to collect the payment you now know nothing about.

THE SOONER THE BETTER

Time is of the essence.  This is a contract term I have recently learned.  It simply means that you agreed to pay the debt at specific time and when you stop paying the debt, YOU have breached the contract and  THEY can legally begin collection procedures.  If your phone has been ringing off the hook, this is part of the reason why.  Don't let anymore time go by without doing something. 

REVIEW THE STATEMENTS

It is now (past) time to start looking at the your statements.  You are not going to know what to do until you know what they say.  I know it is a little scary.  I know it will feel overwhelming.  However, you have to get informed in order to move onto the next step.

DEVELOP A PLAN OF ACTION

OK, let's get started.  Open the letters.  Now, determine which creditors are past due.  Now you know why some of them are calling.  The good news... the "power" may still be in your hands.  Develop a plan of action.  Who can be paid?  How far past due are you? Is there an opportunity to catch up?  These questions are answered as you review your statements.  Next, you will need to determine who needs to be contacted.  Can new payment arrangements be made?  And then, what about the budget?  Before making any solid decisions with the creditors, you need to review your finances and be honest with yourself about what a realistic payment plan will be for you.

YOU MAY STILL HAVE OPTIONS

It is time to stop hiding.  You may still have options.  You have already tried the first one (ignoring the debt) however, you won't be able to hide for long and, to borrow a line (with a little twist) from Liam Neesen in Taken, "they will look for you, they will find you and they will kill you"...financially that is.  You will want to review your debt because you may still have options.  It could simply mean restructuring your budget and cutting out a movie or fast food.  You could enter a debt management program and potentially lower your payments and interest rates as well as get back on track; you may be able to work with the creditor to settle your debts; you can sell assets and lastly, if necessary, you may need to file bankruptcy

IF YOU NEED HELP

I know all of this financial talk can be a little daunting.  It is sometimes helpful to speak with someone who can give you an unbiased but thorough opinion.  Speak with a Certified Credit Counselor.  They will assist you with determining your options.  Best of all, they will help you with organizing your budget.  Use some of our Educational Resources if you would like.  Bottom line, stop "playing financially dead" and come out from under debt and do something about getting rid of it. 

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