The economy is growing again. But if things are looking better, why are we feeling worse? You have to agree that the past few years of bad economic news has colored our thinking. We tend to gloss over any positive news while focusing on gloomier headlines. It's time to get in touch with a "better reality' and take actions that will improve our financial situation.
- Take steps to survive another economic downturn. If you don't have an emergency fund covering your monthly living expenses, start one. Your immediate goal will probably be setting aside a sum to cover expenses for three months. When you've accomplished this goal, continue savings enough to cover expenses equal to six months.
Check your credit report. Applying for a job, an apartment, a credit account, a home mortgage-all of these financial actions will be affected by our FICO score and the information on your credit history. Know where you stand, then tackle any errors listed on your report by the credit bureaus.Nike says "Just Do It" and so do I. It may take some time and effort, but you are worth it.- If you have student loans, pay them every month as scheduled. Most student loans can not be discharged through bankruptcy. If you are in default or deferment, make arrangements to get back on track. The only way to get rid of student loans is to pay them off. If you are not paying them down, they are growing...that amount continues to increase and you'll never be free of them.
- Take a look at your credit card debt. Analyzing your charges each month tells you where you are spending the money you are borrowing from credit card companies. When you are charging items or services, be sure that you really need them...at least enough to add the amount to your credit card balance. Eating out, getting a manicure and pedicure, going to a show or a movie- guess what. You can live without these things until you have the money to pay for them. The goal is to maintain a credit card balance of zero. It's not whether you can pay the minimum monthly payment or not. The question is can you pay the entire balance of your charges at the end of the month. Think about it, that would mean paying no interest and living within your means. That's the ideal situation.
- Your Emergency Fund Revisited: While some advisors, i.e. Suze Orman, recommend an eight month emergency fun, you should focus on accumulating just one month's obligation in a reserve "do not touch" fund. After you've saved one month's obligations, focus on putting aside the second month's obligations into your savings account. No matter how slow, no matter how hard...put aside something each month and continue until you have the security of knowing that you can live a few months if your pay check is cut off. It's well worth the pain and sacrifice that it will take to accomplish this task, but you can do it.
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