Posts Tagged ‘Options’
Are you in survival mode or beyond?
If you step back and look at your finances, you will find that you are in one of three stages of financial being.
The first stage is “survival mode”. This is where you are just barely getting by. There is just enough cash flow to put a roof over your head, food on the table, gas in the car. But very little room for anything else. This is a dangerous place to be as any life event – big or small – can tip the scales and start you on a downward spiral. Credit is often used as a crutch, with the best of intentions, to balance out the budget.
The next stage is the “breathing room” stage. You are here if you have enough cash flow (not including credit) to survive and to deal with things as they come up. If the car breaks down, you can get it fixed. Maybe not right away, or it may set you back and you will have to adjust to catch up. Credit can be used as a safety net but caution should be stressed to keep the credit use at a minimum and ensure you can manage the payments comfortably.
The third stage, which is where we all strive to be, is the “comfort zone”. In this stage you are surviving, you can deal with irregular expenses as they come up, and you have the flexibility to do some or all of the things you want. Often times, credit is used to “enhance” this position. A dangerous game. You should proceed with caution.
So, what stage are you in? Where do you strive to be? The first step is AWARENESS. The second step is ACTION!
It’s been six long months and my hands are cleaner than ever. Who would have thought I would make it this far?
I am referring to life without a dishwasher. Around mid-December, ours broke. My first reaction was sheer terror. I’m pretty sure I almost lost consciousness. Like many families struggling to make ends meet, I didn’t have any savings to buy another. The word credit kept flashing in my mind, but we were just managing what we had. I took a deep breath, pulled up my rubber gloves, and started washing.
It wasn’t so bad. “Not much more work then rinsing the dishes, loading and unloading the dishwasher”, I thought. Day 2! – It occurred to me that growing up we never had a dishwasher, we, gasp, washed and dried them – by hand. I then had a BFO (blinding flash of the obvious!). My gosh, we are raising a generation of kids who never have to wash dishes. Visions of power failures and piles of dirty dishes flashed by. I decided to start operation “Dishpan Kids”. I asked, in a way that made it sound incredibly exciting, “Who wants to learn how to wash dishes?”. It was fun. The family doing dishes together. What a concept.
I will admit, I had some setbacks. Entertaining guests poses some additional challenges (clean-up takes slighly longer than loading the dishwaher) and some surprises (during our last get-together, the guys did the dishes while the girls played cards…hmmmm…). A month or so after we began “Operation Dishpan Kids” I found out that the dishwasher actually was not broken. It’s something under the sink (that’s as intelligent as I get on that subject). It will probably take an hour and 20 bucks to fix. But you know what? I’m ok. I think I can go without. In fact, I kind of like it. I enjoy watching my family share in the responsibility and I have a really great two-level dish rack to dry my dishes on. 
I, like many others, jumped on “The Secret” bandwagon. I watched the movie and began incorporating the process into my life. It wasn’t that difficult, I’m generally a positive thinker . A few years ago, my friend gave me “The Secret” calendar with a thought for each day. There is one that particularily caught my interest. It was about money. And for the past decade or so, money, or lack thereof, had been an issue for me and my family. The thought went like this…
Isn’t it wonderful? There is absolutely no reason to wait for something you can’t afford now. And the deal is much better than buying it on regular credit that has to be paid starting next month. Ah! what a wonderful consumer-driven world we live in.
It’s also dangerous. In fact, it’s a trap – a credit trap. The objective is to have you commit future income towards the purchase of something you just can’t (don’t want to) wait for. We are such an impatient society aren’t we? Wait! It gets better – you are further tempted (expected) to spend more than you normally would on the item(s) AND the gamble is that you won’t pay it off completely by the time it comes due.
I have to admit, I’ve been on the no-payment-no-interest (npni) income tax cycle for about three years. What do I mean? It’s simple – buy on a npni deal, payments are deferred for 12, 15 (or even more) months. Your plan is brilliant – when your tax refund comes in you pay it off – in full.
I had a close call a couple of years ago. My income tax refund almost did not come through in time. Whew! Side-stepped that one. Why am I sharing this you ask? Because, I’m human, I make mistakes. The key is to learn from them. I have discovered that there are some key rules to a successful npni endeavor.
Wonderful, accessible, way-too-easy-to-get, way-too-hard-to-pay-off, credit.
It makes the world go around and sometimes makes our head spin. It can be our best friend or our worst enemy. Using it gives you a temporary high. Owing it gives you a long-lasting headache.
Where am I going with this you ask? I shall tell you.
You sort of fall into credit use much like you fall into those early relationships of our youth. Often it happens by chance (an offer in the mail or you’re walking through the mall), it looks exciting, promising. You focus on how it will enrich your life and enable you to move towards your goals (owning a car, house, travelling, etc.). And for a long time all is good. Its manageable. And because you are managing it, you get offers for more and better credit (ok , not sure if that parallels so much in relationships). And then! One day! You realize! The honeymoon is over and you actually have to work a bit harder, make some sacrifices, actually live on – dare I say it? – a budget.
At some point throughout that process you have what Oprah calls an Aha Moment and you realize just how much credit (or the credit system) has used you versus you using credit. And you settle in – hopefully – to a new relationship with credit. A mature relationship. Sometimes it lasts (you reduce or eliminate your debt and change the way you use credit). Sometimes you redefine your relationship (consolidate or enter into a debt-reduction strategy). And sometimes you break up (bankruptcy).
My wish for you is that you develop a strong, eyes-open, respectful relationship right off the bat. Or at least work through the issues early enough to learn, and grow, and make credit your friend. If your relationship with credit is on rocky terrain, seek help early. I believe marriage counselling should be mandatory before signing the marriage certificate. And financial counselling should be mandatory before signing the credit application.
Feel free to visit our site for guidance on financial issues www.haleyrustee.ca , or contact me and ask me how I can help you maryann@haleytrustee.ca
Do you have an experience about your relationship with credit that you would like to share? Use our comment feature and share with others.
I will often tell my clients, or anyone who will listen for that matter, that we are all one or two events away from bankruptcy. What do I mean by that? I mean that all it takes is one or two major events, such as an illness, a layoff or a divorce, to turn our financial world upside down. The reason is simple. We live too close to, or above, our means. As a result our credit is maxed out, our savings minimal, or worse, non-existent, and we have absolutely no breathing room. When a major event happens you quickly get behind to the point where catching up is a challenge. And that’s IF your situation improves. If it does not, you dig a deeper, darker hole.
The solution is so simple. Ok, I say that recognizing that once you are in trouble financially, it takes time, patience and hard work to get back on track. Generally speaking though, you need either savings or available credit to get you through the tough times. Obviously savings is best. But having unused credit can help bridge the gap if savings are unavailable. I do offer a word of caution – “if you are going to use credit, you need to be very, very organized and have a well thought out plan”. Otherwise, the risk is great that you will get in over your head.
If your credit is maxed and you have no savings, you need to start a debt reduction strategy immediately. Beginning a savings account while reducing your debt makes the most sense, as this will eliminate or reduce your dependency on your credit to get through those expenses that pop up both expectedly and unexpectedly. There are many options for reducing your debt, from establishing a budgeting plan, to refinancing, to offering creditors a settlement on the amount you owe. The following link will provide you with some information on specific services designed to help you reduce or eliminate your debt. http://www.haleytrustee.ca/solutions.php