Advice on Financial Difficulties

With mortgage expenses, auto loans, credit card bills and monthly living expenses, debt can accumulate in a hurry and, without the appropriate level of savings, an unexpected job loss, medical bill or other expense can trigger financial problems for just about anyone. Living with debt can be a difficult, almost hopeless situation, but there are steps you can take if you run into financial troubles.

Deal with Your Debt

You have a mountain of bills and not enough money coming in each month to pay them. The first step in making things right is contacting your creditors. Try to work out a payment schedule that works for you before your account becomes delinquent. Ask if the company has any hardship programs available, or if they'll suspend payment for a month or two while you get your feet on the ground. Ignoring the bills and not answering collection calls will just worsen the problem and damage your credit. Or, you might be faced with the unpleasant reality of a foreclosure on your house or repossessing of your car. Remember your rights. Under the Fair Debt Collection Practices Law, you are protected from harassment, threats, false misrepresentation and information, and other tactics to get you to pay. Do not shrink from your debts but do not let yourself be intimidated either. Being proactive with your accounts could end the collection calls before they start.

Develop a Budget

Whatever your financial difficulties, you'll need to determine what you can spend on a monthly basis. Developing a budget is a must. The first step is finding out exactly how much you are spending so you can determine your priorities. Obviously, you'll need to carve out enough money to pay for housing; necessities such as food, gas, and utilities; and unsecured debt such as credit cards and auto loans. If you have been paying for some of these basics with credit, you'll need to stop. You might have to make some adjustments in your lifestyle, including major changes such as selling your vehicle for a more inexpensive ride or downsizing your living quarters. You can't move forward without a budget, and it must be a budget you can stick to on a daily basis.

Seek Credit Counseling

Sometimes financial problems are too large for you to handle on your own, and you might want to look into credit counseling and debt management plans. Make sure the company you choose is reputable and you are not paying fees for services you could have done on your own. A credit counselor can help you look at your entire financial picture and help create a debt management plan. Avoid agencies that require up-front or monthly fees or pressure you to make a "contribution." Debt consolidation programs can help lessen monthly bills, but it is important to know what to do with those savings. Spend more and you'll fall deeper into debt. It is best to use those savings to pay down more debt or stock away in a savings account to start rebuilding your finances.