In the midst of an economic meltdown, it can be tough to track your finances and start saving for a rainy day. But in the years since the recent Great Recession ended, many people are indeed trying to get their budgets back on a positive track, staging a financial comeback after years of dire economic setbacks.
In fact, according to our friends at WalletPop, even if you “messed up your finances in your 20s, then made matters worse in your 30s,” and are now “ready to act your age, get serious about the business of fixing your credit and start writing your financial comeback story,” it’s possible to “bounce back and take control of your financial future.”
“How,” you may ask? Well for many average Americans it’s all about heading back to basics, getting your financial house in order by following a few simple steps, including:
Checking your credit report.
Whether you’ve just concluded the bankruptcy process, been denied credit, are checking up on an identity theft incident, considering buying a home, or any other financial endeavor, it pays to check out your credit report. Why? Because when you’re trying to rebuild your credit health or prove you’re a good credit risk, it’s important to see what others see, namely your credit score.
According to WalletPop, you should “Order your credit report from AnnualCreditReport.com, and verify that all the information listed on there is accurate….You won't know what's in your files with Equifax, Experian and TransUnion until you check those reports. So just go ahead and do it. If you find errors in your credit reports, dispute credit mistakes right away.”
Keeping Track of Your Spending.
If spending sprees got you into credit trouble, tracking your spending, including income and expenses, is one of the best ways to dig yourself out. According to WalletPop, you shouldn’t dread the process: “Don't look at budgeting as a necessary evil. Instead, focus on the benefits it offers: knowledge of where your money is going, better cash flow management and peace of mind as you stop living paycheck to paycheck.”
This move away from “hand-to-mouth” budgeting methods will help with the next several pieces of the “comeback” puzzle…
Starting to Live on Cash.
Often the best way of getting a handle on out-of-control spending is by simply living within your means and only using cash. Obviously, this system teaches the valuable lesson that if you can’t pay in cash, you can’t afford it. Not only that, but in the process you can “break the cycle of dependency on credit cards” as well as becoming “more conscientious about your spending habits,” helping you decipher what you “need,” versus what you simply “want.”
Creating your "rainy day" fund.
Creating a small stockpile of savings, commonly known as a “rainy day fund,” can be crucial for one-time, unexpected expenses that call for between $500 and $1,500. Whether you need new tires for your car, a fix for that leaky toilet, or to pay for a medical emergency, this small set-aside from your everyday savings can pay dividends by allowing you to avoid credit when dealing with the inevitable financial setback.
Working on a Larger Emergency Fund.
According to WalletPop, “In addition to creating your "rainy day" fund, you should also work on amassing a more sizable emergency fund. This savings account should be between $3,000 and $10,000 in size – or even larger….Unlike a rainy day fund, which helps you recover from a one-time event, the purpose of an emergency fund is to tide you over during a long-term personal or financial crisis, such as when you get a pink slip or go through a divorce.”
Consider this fund to be insurance for emergencies that last three to six months, including those unplanned, long-term bumps in your annual budget-building.
Getting More Help.
Once you’ve assessed your income as well as your spending, you may come to the conclusion that that you don’t have enough money to cover your many monthly expenses, much less save for a rainy day. At that point, you may want to consider bankruptcy. A bankruptcy filing can discharge debt and allow you to save for your next financial steps, including your home, your child’s college fund and even retirement. In short, bankruptcy can end the worry and stress of living on the financial brink…a comeback any of us can appreciate.
So, remember, if you are having trouble dealing with another year’s worth of debts it may be time to join the millions of Americans who are choosing bankruptcy in 2011. The bankruptcy attorneys at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their advice. Just call toll free to 1-888-234-4181, or find them online during off hours at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.