Honestly, I don’t know anyone who hasn’t encountered some financial difficulties at some point during their life. My lean years were during my time in medical school and residency, where I wasn’t working and my savings started to dwindle. If you find yourself in this position, what do you do? Here are some strategies:
Do not panic, breathe and begin to assess where you stand. Absolutely do not ignore those bills – that is the worst thing you can do because they will not go away. Take a different perspective and a hard look and say – okay this is a challenge, a temporary one, that I will overcome. Try to have a positive attitude about it but do not ignore the phone calls or mail. Each late payment will affect your credit and your score. A 30+ day late payment stays on your credit report for at least 7 years and can drop your score 50 to 60 points. A bankruptcy can drop your score by 100 points and will stay on your report for 10 years.
Call Your Creditors.
Call every one of your creditors, explain your situation and work out a payment plan with them. Many creditors have hardship programs that can reduce your monthly payment, your interest rate or revise the terms of a loan. Be proactive and contact them the minute issues arise. Creditors would rather work with you than write off a balance as a loss.
If you are able, transfer balances to a zero-interest credit card and pay off that balance during the specified time period – all your payments will reduce the principal balance. Apply extra income like a bonus, income tax refund and monies from a second job to the credit balances. This leads me to my next point….
Do Not Add More Debt.
Once you pay off a balance or you find yourself debt-free, do not add more debt. Now I know that might seem like super common sense, but there are plenty of individuals who find themselves filing bankruptcy multiple times because they did not change their behavior. Think of your overall financial goals, make plans and set priorities to achieve those goals.
When You Are Financially Stable – Next Steps:
Set your goals and priorities, budget, begin saving and investing, meet with your financial team (accountant, planner, and advisor) regularly, and enjoy financial freedom!
I’m Dr. Randi B, MD your board-certified pediatrician and financial wellness expert providing your Rx to wealth and financial well-being through my financial coaching program; speaking engagements; my book, Ladynomics: A Woman’s Prescription for Wealth and Financial Well-Being (number one bestseller on Amazon); my blogs and my website drrandibmd.com. Please follow me on all social media @DrRandiBMD.