Have you experienced a recent financial disaster? You may not have seen it coming, like being laid off in the middle of a pandemic. Regardless of what the catalyst was, the important thing now is to look toward discovery and recovery. In today’s blog post from Foundation Credit Union, we will offer 6 vital steps toward recovery.
Related Post: How to Save Money When Times Are Tough (Like During a Pandemic) by Foundation Credit Union
1. Identify and Deal
While there may not be much you can do about it, understanding how you got here will help ensure that you prepare in a way that you never go through this again. Managing your money and preparing for future financial challenges will help you survive crises later. But in order to develop a solid recovery plan, it’s important to understand how you got here.
Let’s examine a few things.
- Credit card debt: Is it crushing you?
- Loss of job: Can you file for unemployment?
- Overspending: Are you living beyond your means?
- Investments: Did your investments crash or fold?
When was the last time you took a thorough inventory of your debt? Is there a random credit card hanging out there you forgot about? What about that medical bill from 10 years ago?
Here are some tips to get you started.
- Check your credit report. A credit report will show you everything that your credit is being counted on, some of which you thought went away, others that you forgot about. Getting this cleaned up will help you improve your credit score.
- Pay off credit cards. If you can, pay down your credit cards and cancel as many as possible.
- Clean up history. If you paid off debt some time ago but it’s showing on your report, call the credit bureau or creditor and have it removed.
- Make a list. Make a list of all outstanding debt, including cars, home, real estate and any other loans.
3. Set Goals
Now that you know what your credit report says and you’ve made a list of all your debt, it’s time to set some goals. It’s difficult to move forward on any project without goals. You need to understand where you want your efforts to go. In this case, you want to create a stable and secure financial future for yourself and your family, one that is as disaster-proof as possible.
Write out where you want to be in one year, three years, five years and 10. Be as specific as possible.
Your plans could look something like this:
- Pay off two credit cards in the next 12 months.
- Buy three rental properties in three years.
- Open a savings account. Put $200 in it each month with a balance of $2400 in the next year.
- Start a retirement savings account in 6 months.
4. Make a Plan
Now that you know exactly how much you owe, make a plan to achieve these goals.
Here are some tips:
- Develop a budget.
- Set a schedule as to when you plan to call creditors.
- Make an appointment with a credit counselor.
- Make an appointment with a financial planner.
5. Take Action
After you develop a plan, it’s time to take action. Take a look at some action steps to help you achieve your goals.
- Call your creditors and make a payment schedule with them. They would rather understand your circumstances and work with you on a lower payment than receive no payment at all. This will keep you out of collections and avoid credit damage.
- Call an attorney. If you were a partner in a business that has closed or any other investments that you believe may need legal representation, call an attorney who specializes in this. Some attorneys offer free consultations to determine if you need legal representation or not.
- Be vigilant. Now that you know what’s out there and what your budget is, write out a list of monthly payments and stick to them.
- Attend regular credit counseling sessions and heed their advice.
- Create a clear pathway to financial rebuilding with your financial planner.
6. Monitor Yourself
Chances are, you may stumble a little as you pave this new path for yourself. New habits are hard to break and old ones, like overspending, are so easy to fall back into. Work with your credit counselors to develop new habits of spending and paying off debt and begin saving.
Financial Tips by Foundation Credit Union
Foundation Credit Union wants to help you to develop a strong financial position. Consider these tips for how to recover quickly after a financial disaster. Contact us online or call 417.895.2770 for more information on how we can help you achieve your financial dreams.