Everyone runs into some kind of financial trouble during their lives. In today's economy, it's even more likely to be happening to you or someone you know. Luckily, there are many ways to find relief and take care of the problem before it wipes you out.
There are two things you should do immediately to begin to solve this problem.
Create A Budget
First, you need to develop a realistic, workable, and honest budget. The easiest way to do this is to start with two columns: Income and Expenses.
Under the Income line, put your weekly, bi-weekly, or monthly income – your actual take home pay, after taxes, insurance, and everything else. For our example, we'll use Bob and Marie Johnson. Bob works full time and brings in bi-weekly paychecks of $1,400 each, or $2,800 per month. Marie works part time so they don't have to pay for daycare and makes $680 per month. Their total income is $3,880 per month. That is actual take-home money that they can spend.
Now for Expenses. Their mortgage is $1,200 per month and includes insurance and other requirements. Their car payment is $300 per month and insurance is $60. The rest are household expenses: groceries, cable TV/Internet, and so forth. Their total expenses are $2,950 per month. That leaves $930 for paying off debt.
Looking at it this way, Bob and Marie aren't in bad shape. Of course, none of this includes savings plans, emergency needs (with two children, this is always a good idea), and other expenses. It also includes no “fun and entertainment” spending for dinner out or movies. It's just the bare bones basics.
Talk to Your Credit Card Company
The next step is to talk to your credit card creditors. If you are only a payment behind or are struggling to keep up, this phone call, while nerve-wracking, can really do something to help. This is especially true of you've suffered a job loss, medical problem, or something else that has severely affected your income. Often, talking to your creditors can reduce interest rates, result in debt reduction, and often qualifies you for fee waivers and new payment schedules.
A simple rule that I live by is - "It never hurts to ask."
For Bob and Marie, none of this applies, but they do have chronic late payment fees on one of their cards because its due date is three days before Bob's paycheck is deposited every month. So Bob called the company, talked to them, and got all of those fees removed from the past two months (at $25 or more each, that is a great way to get back some much needed money) and rescheduled the payment due date for five days after his check normally deposits, giving him time to write a payment and have it in the mail when he's paid.
Little things like this can really begin to ad up quickly. This is only an example, but in both good times and bad, being honest with yourself about your money is the first big step towards keeping your financial health in order.
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