| Moving Forward |
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It is essential that you now commit yourself to repay every dollar you owe. Doing this, will provide you with an enormous amount of confidence, when facing hurdles in the future. These hurdles may not necessarily be financial related either, but the confidence gained can be used. You could also use an affirmation like:
Depending on your debt problem, you may at some stage have to enter a repayment program. To do this you need to work out what you can afford to pay all your creditors. That may include loans, credit cards, rent, telephone, gas & power. Basically anyone you owe money to.
The next step is to set up a fair and realistic repayment program with them all. Use our debtonator to assist here. If you have a lot of smaller creditors and one larger one, say a personal loan or a credit card, then it may be worth your while to request the loan go to interest only. This will provide more money to repay the smaller debts faster and then concentrate on the loan. You might ask why don't I just try and consolidate my small debts into the loan. This is very common these days and in our opinion much too common. This provides a quick solution but doesn't change your behaviour pattern and all too often the debting continues and a couple of years down the track you will be worse off than you are now. The advantage of having a repayment program is it provides time to work on the changes you need to make on how you handle money. By the time you have got your head above water you will find two positives.
One word of caution, don't let your heart overrule your head when setting up repayment arrangements. That means to not let your enthusiasm for this new program set up a budget which is unrealistic. Ensure your new budget allows you with some pleasures. This may mean a visit to the cinema every couple of weeks. Before you may have gone weekly and had a meal beforehand as well as some treats at the snack bar. Now it is just to see a movie with a meal at home. It could be a one week holiday in the country where you take your push bikes and spend days on cheap family activities. This is instead of flying to Queensland for a week visiting theme parks.
Remember one point. You are now getting out of debt instead of into debt. This is a major turnaround.
Just for today, one day, do not incur any new debt.
Your dealings with creditors (who you owe money to) must be on a professional level. Be on the front foot by contacting them to work out a repayment program. Once agreed, do everything you can to ensure all repayments are made on time, every time. Keep a record of all correspondence both received and sent and keep it all together. Any phone discussions must be written down with what was discussed and agreed upon including the date and who you spoke to. File this in date order with the other correspondence. The reason being that often the person you deal with in a particular organisation leaves and the new person you deal with may not be aware of the history or current arrangements. By being organised you can tell them about a certain discussion with their predecessor and what was agreed. They then should be able to go through their file records and confirm this. It shows to them you are being professional in your approach.
This is why it is important to stick to repayment arrangements. Working in lending in a Bank for over 20 years really showed me the importance of this. Far too often customers would make repayment arrangements on overdrawn accounts or loan arrears and constantly fail to meet the repayments on time. Over a period of a couple of years their poor history really stands out when noted in their loan file. Often the organisations will have a manila folder with all paperwork inside it and the top copy showing a statement of the debt. At the top in red a statement saying $50 per week arranged. Have a look at these two different scenarios and see which one would is more likely to be able to arrange a reduction in the repayment arrangement for a valid reason.
Scenario 1
January 1 $2,000 Dr $50 per week arranged January 8 $50 $1,950 Dr ? 15 $50 $1,900 Dr January 22 $50 $1,850 Dr January 29 $50 $1,800 Dr February 3 Client phoned creditor will be 3 days late February 8 $50 $1,750 Dr February 12 $50 $1,700 Dr February 19 $50 $1,650 Dr February 26 $50 $1,600 Dr
Scenario 2
January 1 $2,000 Dr $50 per week arranged January 6 $50 $1,950 Dr January 17 $50 $1,900 Dr January 26 Creditor phoned client as 22/1 payment late. He said he will pay in next couple of days February 4 $50 $1,850 Dr February 13 $25 $1,825 Dr February 18 $50 $1,775 Dr February 28 Creditor left message on answering machine March 5 Creditor again left message on answering machine March 9 $50 $1,725 Dr
(Client didn't phone creditor back, they just paid $50 hoping this would stop the creditor from ringing!)
It's not hard to see which client the creditor will have a good look at to favourably consider the proposal is it?
Imagine how this looks after one year. In most cases the person you are dealing with has to check with their supervisor to gain approval for any change in arrangement. The supervisor will look at the repayment record and almost always make a decision based on the willingness of the client to repay the creditor as originally agreed.
It's interesting to compare the two clients.
Client 1 made the 1st few payments on the exact day required until payment 5, however they phoned their creditor prior to it being due.
Client 2 paid the 1st payment ahead of schedule and then from then on was late and had to be called up by their creditor. Clearly they have no system with their repayments. Maybe they agreed to a repayment record they have no way of adhering to because of other debts. Perhaps they are struggling with their priorities and are still debting!
If creditors see you are having a go they may assist if you are struggling to make a couple of payments. This is of course only if you have made a solid start.
Bills: I think it is important that you work towards a system of paying all bills immediately. Bills include utilities, loans, rent, car repairs, rates, telephone, insurance etc. By immediately I mean the same day you receive the account. You might ask why? Well to start with you earn hardly any interest in normal bank transaction accounts anyway. Secondly it enables you to really have a good understanding of what available money you have to meet any unexpected accounts. By this I mean large car repair bill or dentist bill. It doesn't include those bills listed above because you already knew they were coming.
Those bills come around the same time, they just have different cycles. Some might be annual, quarterly bi-monthly or monthly. A good idea is to set up a chart showing what expected bills you have each month. To do this just review all of these bills over the last year. I know some vary but usually not very much. The gas or electricity bill can vary quarter to quarter however last winters bill should be pretty similar to the one you receive next winter. You could even include birthdays in there as well.
Motor vehicle repairs are the only one that comes to mind that can fluctuate greatly. This could be estimated based on number of services per year and average amount of cost per service. You could talk to your mechanic. They may be able to give you a printout of date and cost of all services/repairs over last 2-3 years and you could use this to work out an estimate.
This system is just another one that enables you to have a much greater understanding of where your money goes.
Conclusion
As you work through this program, over time some of the areas covered should become second nature.
The use of the cash diary might not be needed anymore. You also will be reviewing bank statements making sure transactions are correct and also as a checking system on your spending.
The use of affirmations to ensure money remains a conscious part of your life. The affirmation needs to be changed on a regular basis say every 3 months.
Just for today, one day, do not incur any new debt. This is very important and should stay one of your affirmations forever.
The use of credit cards and debit cards going forward is up to you however I believe you need to be very careful. Once you believe your financial position is back on track, I would suggest you refrain from a credit card for at least 6 months.
Completing a personal balance sheet every year January 1 is a great idea. It allows you to review where you are at and then make changes in how you handle money. A review of the year before allows a balanced judgement to be made.
That's the debt program. There is no miracle cure however there is an end to your financial woes if you want it to be and work at it. The benefit of success is prosperity.
What have you got to lose
Good Luck
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