Tuesday, August 11, 2015
The Absolute Worst Thing You Can Do For Your Finances
There is one thing that is worse for you finances than anything else. It's worse than racking up debt. It's worse than than having a 0% savings rate. It's worse than eating out every meal.
It looks like not opening your mail when it arrives everyday. It looks like dodging phone calls when you don't know the incoming number. It looks like swiping your credit card, and reddening when it unexpectedly gets declined.
The absolute worst thing you can do for your finances is to ignore them.
Let's say you're racking up debt, but you open your monthly statements. You're well aware of how much you owe, and when it's due. This empowers you to not incur a late fee, and avoid as much interest as possible within your budget constraints. Racking up debt is a bad, bad idea, but when you're aware of how bad it is, you are able to take the first steps towards fixing it.
When you don't open the mail, your self-imposed lack of awareness will cause you a nightmare down the line with incredible interest and a long list of late fees.
If you're avoiding calls from creditors, whether they be for credit cards or medical bills, you're missing a change to negotiate. Even if you can't pay your debt, the creditor isn't going to forget about you just because you don't pick up the phone. If they do, by some miracle, stop calling, that doesn't mean the debt isn't there. It just means you have cut off contact as your credit score is likely suffering. Pick up the phone. Negotiate if at all possible on interest rates or balances. If you can't, at least let them know how much you can reasonably pay in installments. This can lower your monthly payment requirement, and while it won't erase interest, it will allow you to make more progress than if you pretend the debt doesn't exist.
If you're not keeping track of your credit card balances because you just don't want to face reality, you're going to have more problems than being embarrassed after checking out at the store. Awareness is a powerful tool. If you know how much you're spending on credit every month, you're more likely to make a budget to figure out how to spend more within your means. You're more likely to figure out a way to pay off your balance. You're more likely to identify the problem before it turns into a financial tragedy. If you are not keeping track, you're almost guaranteed to spin out of control very, very quickly.
Be conscious of your finances. Just because they are bad doesn't mean they're not salvageable. The only way you can't save them is if you pretend they don't exist.