What Not to do When You’re In Serious Financial Trouble
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When debts are spiraling out of control and scary creditors are knocking on your door, it’s easy to react impulsively out of fear and worry. The fact is, when your mind is weighed down by serious debt, it is difficult to think clearly. Some decisions you make can actually make the problem worse and there are a number of things that you should avoid if you are looking to become financially secure.
Don’t ignore the problem:
The ‘out of sight, out of mind’ mentality is one that many practice when dealing with mounting debt. It is a coping strategy that works in the short term but the more you ignore financial trouble, the more it accumulates. High interest rates and additional fees will cause debt to grow while it remains unpaid. Although it is difficult and embarrassing, it is important to talk to creditors and lenders if you are having difficulty repaying loans. Many creditors would prefer to work out a payment plan with you because it is better for them to receive the money in smaller installments than not at all. This is particularly important if you have been made redundant or have gone through a divorce; lenders won’t know your situation until you tell them.
Don’t forget to make a budget:
If you are in financial trouble, chances are your budget making (and budget sticking) skills are not entirely up to scratch. Financial planning is an incredibly important part of getting out of debt, so make sure that you create a budget that you can afford. A good part of budgeting is managing your banking so it is wise to consider all of the options when choosing where to store your money. Overdrafts and credit cards can be a tempting quick-fix for those in a tight spot but they will eventually have a devastating effect on your finances if they remain unpaid. Opening a basic bank account can combat these issues because they do not offer an overdraft facility or a credit card; they are essentially just places to store your money.
Don’t promise to pay more than you have:
Negotiations with creditors can become aggressive and when they do, reassuring that you will pay a large sum of money can be a reflex. Of course, it is stressful when lenders hound you and threaten you with debt collection. However promising to pay what you don’t have will be damaging to your own finances and will complicate the relationship you have with the lenders. It can make them unwilling to renegotiate your loan terms in the future and can even result in lawsuits to obtain the money owed.
In essence, the trick to getting out of financial trouble is to think clearly, plan for the future and stick rigidly to a budget. It can be helpful to visit a financial counsellor who will help you have important conversations with your creditors. By avoiding the mistakes above, you can begin to plan for a brighter and more secure financial future.
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