A Financial Start Without Guilt

Over the last few years I’ve provided many tips designed to help you develop power over your finances. This power is what will motivate you to develop the good habits that will keep you out of debt problems.

Folks, for those trying to make a new financial start, whether aiming to avoid bankruptcy, or even rebuilding after filing for bankruptcy, the most important foundation of a fresh start actually has nothing to do with money or specific financial do’s and don’ts. The first, and most important, step is to absolve yourself and your spouse or partner of guilt. The past is past, and we are going to focus on the future. Whatever mistakes you feel you have made with money, whatever moves you wish you had or hadn’t made, are irrelevant. We are free to move forward only when we remove the emotional shackles of regret and self-blame. This cleansing step is especially important for couples. You are in this together, so no finger-pointing or arguing about any past decisions. Having said that, here are some suggestions for today.

In my bankruptcy practice it is common for clients simply not know the present state of their finances. But getting present to your finances is a huge step toward getting control. And it’s impossible to map out a route to your destination if you don’t know where you’re starting from. So the first step is to take a “before” picture of your finances: open every single financial statement—bank account, credit card, mortgage, 401(k), brokerage account—and take a look. Do the same with your regular monthly bills. Only when you have everything in front of you can you set priorities about what to do next.

Set up a file folder for each account so you can stay up-to-date on each one. (Always elect to receive paper statements—resist the suggestion to receive email statements, they’re too hard to keep track of).

Second step—your checking account. Having trouble keeping track of your checking account balance? Tired of bouncing checks? A checking account actually is a key tool to gain control of your finances, it you’re in control of it! Try opening a new checking account and starting fresh (keep just enough in your old account to cover outstanding checks—you can close it later). Have your paycheck directly deposited into the account. Next, sign up for on-line banking, where you can set automatic payments on your regular bills. No more missed payments! With on-line banking is easier to stay present to the money you have. And get that ATM card. Use it for your daily purchases, not your credit cards. (Hopefully you long ago heeded my advice to put your credit cards in a drawer—don’t have them handy. They’re too easy to misuse).

Third, get very familiar with the status of all your credit cards. List them by name and account number with the balances, interest rates, minimum payments, and due dates. This can be confronting for some people but it is absolutely necessary. Since the cards are already put away in a drawer you’re now going to develop a plan of paying them down. Start with setting automatic payments from your bank account. Concentrate on the card with either the highest interest rate or the lowest balance that can be paid off quickly. Make paying down the cards one of your highest priorities.

Finally, it is not a sin to negotiate with your creditors. Call them and explain your situation frankly. Make it clear you’ll do everything you can to work with them. Most lenders will agree to a workable plan if you explain your limited options. Have your budget mapped out so you can present a specific option—aim to cut your payment by a third, say from $600 to $400. If you get nowhere with the phone rep, respectfully but firmly ask to speak with a supervisor.

Folks, gaining power over your finances is a series of these small steps. But because each step is small we can become discouraged. Debt problems can easily seem overwhelming.  I’m here to encourage you to take those small steps, and to create those good habits, that can make changes in your life—you’ll changes before you know it. Even if you ultimately have to consult me about a bankruptcy, I want to be sure you’ve tried every possible alternative. If you have questions about bankruptcy or getting control of your finances call me for a free first consultation–at 831-424-1764. I’m in Salinas at 217 West Alisal Street, corner of Riker Street. If you find yourself in serious debt trouble, I’m the man to see.