Spring Forward: Bouncing Back from Money Mishaps

Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending. -Carl Bard

Whether you are just starting out on your financial journey or trying to get back on track after a setback, this "money stuff" can seem a little overwhelming. We all have felt this way at some point, but instead of letting our money get the best of us, let's resolve to Spring Forward from our setbacks this year.  Here are some ways to bounce back after some common money mishaps:


Back Track: Your bank account is overdrawn
Bounce Back: The main way to prevent this from happening again is to track your spending.  You need to have record of all money coming in to your possession, and all money coming out.  The simplest way to do this is to make a list placing your income at the top and deducting each of your expenses as they occur; at the end of the month, your total at the bottom represents your personal "net profit" (if you have money left over) or "net loss" (if you spent more than you earned).  Always aim for the profit! Some months you will have a surprise expense or emergency.  It happens.  But, if you plan ahead and make sure that on most months your accounts reflect a profit, you will maintain a buffer that protects you from overdraft when your expenses are higher than expected.  Another way to maintain this buffer is to link your bank accounts together so that if there is not enough money in your account to cover a purchase, a set amount of money will automatically transfer from your back-up account.  Instructions on how to do this should be available on your bank's website.


Back Track: You've maxed out your credit card
Bounce Back: First things first, stop and reflect on the reasons why your spending has gotten out of control.  What drives you to spend? Is your credit card  the first thing you see when you open your wallet?  Once you have that under control, create an organized plan to pay down your debt and set a target date to have your debt paid down.  Know where the money to pay down your debt will come from, and adjust your budget so that money is available.  Be sure to make regular payments on your credit card.  Your payment history makes up 35% of your FICO credit score so it is important that you don't miss any payments.  If you have been a good customer to your credit card company for a few years, contact the company to negotiate a lower interest rate for your card or an increase in your credit limit.  A reduction in interest would mean that more of your payments will go towards reducing your balance (and not to interest) which would free up some credit, and a higher credit limit will improve your debt utilization ratio (the amount of debt you have out of the amount of credit that was given to you).  This also improves your credit score and makes you appear more financially responsible.



Back Track: You applied for credit (loan, credit card, etc)...and were denied
Bounce Back: No worries, if you've been following the advice above, you should be gradually improving your credit score.  Another way to improve your credit score is to focus on paying off the debt with the highest interest rate first.  These debts represent your largest burden because despite how hard you work, it is harder to get the balance down because a large portion of your payments may be going to the interest that is racking up every month.  Sometimes, your credit score is affected by actions not caused by you.  Your credit report may contain errors, such as incorrect or missing information, that can drastically affect your score.  Be sure to request copies of your credit report from each of the 3 major reporting agencies; you can request 1 free report each year from each of the 3 agencies, so I try to stagger my requests so I have access to my credit report every 4 months.  If you do find errors, refer to the Federal Trade Commission Website
for instructions on how to dispute these errors. 
Now it may seem like a good idea to keep apply for credit at multiple places just to see if you will get lucky and get approved...Trust me, it's not a good idea.  These actions will show up on your report, and many of those in a short period of time will make you appear desperate risky to lenders.  Find out more about this here.


Back Track: You are drowning in student loan debt
Bounce Back:  Here is a word of advice--When looking into getting student loans, borrow what you need and not how much you want to maintain your lifestyle.    Sure, it is difficult to work and bring in enough income to live off of while in school, especially if you are in graduate school, but bringing in some money can keep your loan amounts to a minimum and can provide experience to help you jumpstart your career after school.  If you find yourself having trouble paying your student loans, explore options of deferment or forbearance that can temporarily stop your loan payments or decrease your monthly payment amount. There are also options for you to change your repayment options, either by extending your repayment plan or starting a graduated payment plan that adjusts your payment amount every couple of years.  Be warned, however, that with all these options your loans will be accruing interest at the same rate, so try to pay as much as you can.  There are also incentives provided by loan holders that reduce your interest rate if you sign up for automatic payments each month, which can decrease the total amount you will pay over the life of your loans. In addition, the federal government has a Public Service Loan Forgiveness Program for public service employees where after 120 qualifying loan payments, the remaining amount you owe is forgiven.