You're deep and Credit7 and desperate to get out. I've been in your shoes. Regardless of how you got here, you can get out, and you need to have a plan. But, just as important as the "do"s of getting out of Credit7 are the "don't"s. You may not see these tips in your favorite Credit0 blog. Most people deal with the positives instead of the negatives. But, one misstep when you are trying to dig yourself out of trouble can cause a Credit0 avalanche. So, here's my list of the 7 things you should never do if you're trying to get out of Credit7.
1. Don't get more credit. I know, it seems like this should go without saying. Most of us got into Credit7 through lack of discipline and through overspending. Credit Credit7 had become epidemic, and many people suffer from what can only be described as a "credit addiction". Let me state this as plainly as I can: More credit will NOT solve your problem. In fact, it will make it worse. You're going to have to get used to doing without some of those extras and getting by on less for a while. And whatever you do, don't take out a home equity line of credit. The last thing you want to do right now is jeopardize your home and erode the equity you have built up.
2. Don't deprive yourself of all extras. I know this may seem contrary to my previous statement above, but I said you need to get used to doing without SOME of the extras, not ALL of them. One of the first things you'll be advised to do is cut back on your spending by cutting out everything that isn't a necessity. Here's why that isn't a good idea for most. It's hard to go from buying every little thing you want whenever you want it to buying only necessities. While it's possible, it's very likely you'll begin to feel deprived which could lead to impulse buying to make yourself feel better. First find out where your money goes, then make reasonable reductions that still allow you to enjoy life, but also help you live within your means.
3. Don't miss payments or be late with payments. Make sure you pay at least the monthly minimum. If you start to fall behind on your bills, you'll find that your interest rates will increase making it even more difficult to pay your bills each month. It doesn't even have to be a missed payment with your credit card. Did you know that being late on your mortgage payment can increase your homeowner's insurance? Being late and missing payments has a domino effect on your overall credit health. If it looks like you may not have enough money to pay everyone this month, find a way to bring in a little more money.
4. Do not take a loan out on your 401K. This is just too risky a proposition. If something should happen and you lose your job, you'll have only 90 days to pay back this loan in full or face early withdrawal penalties and taxes. You are also decreasing your portfolio balance and disrupting the compound interest returns on that money which affects your overall amount of funds you'll have when you retire.
5. If you must buy, don't buy new. Of course, the best example of this is a new car. Did you know that a new car loses 20% of its value in the first year and up to 4% of its value after two years? Even if you just need a dress, think Goodwill or a consignment shop. You can often get something brand new with the tags still on it for a fraction of the price you'd pay in a retail store. Better yet, see if you can trade or barter for something you need. If you cut hair and want a new website, see if you can trade services with a website designer.
6. Don't be the Lone Ranger. Depression is a very real danger for people dealing with Credit7. Make sure you have an accountability partner and buddy that you can just talk to when you're feeling backed into a corner, or feeling like you just have to go shopping. Get together every week and talk about where you have spent money, if you are still on track, and where you need support. Especially in the first few weeks when you are trying to adjust to life on a budget, it can get tough. Often times you think you accounted for everything, only to find out you forget one of those annual bills like insurance that completely threw you off budget. At times like that, you'll really value having someone to talk to who understands what you're going through.
7. Don't forget to pay yourself. Even before you pay your bills, you should pay yourself. One of the keys to not getting further into Credit7 is having an emergency savings fund. Life is full of little emergencies. Like it or not, the washer is going to give out some day. So will the dryer, the HVAC unit, the refrigerator, the tires, etc., etc. Make sure you set aside some money each month to cover those little unexpected emergencies that never seem to come at a convenient time.
It may not be an easy journey, but being Credit7 free is one of the best destinations I can think of. I know. I've been there, done that, and have the t-shirt.
You're deep and Credit7 and desperate to get out. I've been in your shoes. Regardless of how you got here, you can get out, and you need to have a plan. But, just as important as the "do"s of getting out of Credit7 are the "don't"s. You may not see these tips in your favorite Credit0 blog. Most people deal with the positives instead of the negatives. But, one misstep when you are trying to dig yourself out of trouble can cause a Credit0 avalanche. So, here's my list of the 7 things you should never do if you're trying to get out of Credit7.
1. Don't get more credit. I know, it seems like this should go without saying. Most of us got into Credit7 through lack of discipline and through overspending. Credit Credit7 had become epidemic, and many people suffer from what can only be described as a "credit addiction". Let me state this as plainly as I can: More credit will NOT solve your problem. In fact, it will make it worse. You're going to have to get used to doing without some of those extras and getting by on less for a while. And whatever you do, don't take out a home equity line of credit. The last thing you want to do right now is jeopardize your home and erode the equity you have built up.
2. Don't deprive yourself of all extras. I know this may seem contrary to my previous statement above, but I said you need to get used to doing without SOME of the extras, not ALL of them. One of the first things you'll be advised to do is cut back on your spending by cutting out everything that isn't a necessity. Here's why that isn't a good idea for most. It's hard to go from buying every little thing you want whenever you want it to buying only necessities. While it's possible, it's very likely you'll begin to feel deprived which could lead to impulse buying to make yourself feel better. First find out where your money goes, then make reasonable reductions that still allow you to enjoy life, but also help you live within your means.
3. Don't miss payments or be late with payments. Make sure you pay at least the monthly minimum. If you start to fall behind on your bills, you'll find that your interest rates will increase making it even more difficult to pay your bills each month. It doesn't even have to be a missed payment with your credit card. Did you know that being late on your mortgage payment can increase your homeowner's insurance? Being late and missing payments has a domino effect on your overall credit health. If it looks like you may not have enough money to pay everyone this month, find a way to bring in a little more money.
4. Do not take a loan out on your 401K. This is just too risky a proposition. If something should happen and you lose your job, you'll have only 90 days to pay back this loan in full or face early withdrawal penalties and taxes. You are also decreasing your portfolio balance and disrupting the compound interest returns on that money which affects your overall amount of funds you'll have when you retire.
5. If you must buy, don't buy new. Of course, the best example of this is a new car. Did you know that a new car loses 20% of its value in the first year and up to 4% of its value after two years? Even if you just need a dress, think Goodwill or a consignment shop. You can often get something brand new with the tags still on it for a fraction of the price you'd pay in a retail store. Better yet, see if you can trade or barter for something you need. If you cut hair and want a new website, see if you can trade services with a website designer.
6. Don't be the Lone Ranger. Depression is a very real danger for people dealing with Credit7. Make sure you have an accountability partner and buddy that you can just talk to when you're feeling backed into a corner, or feeling like you just have to go shopping. Get together every week and talk about where you have spent money, if you are still on track, and where you need support. Especially in the first few weeks when you are trying to adjust to life on a budget, it can get tough. Often times you think you accounted for everything, only to find out you forget one of those annual bills like insurance that completely threw you off budget. At times like that, you'll really value having someone to talk to who understands what you're going through.
7. Don't forget to pay yourself. Even before you pay your bills, you should pay yourself. One of the keys to not getting further into Credit7 is having an emergency savings fund. Life is full of little emergencies. Like it or not, the washer is going to give out some day. So will the dryer, the HVAC unit, the refrigerator, the tires, etc., etc. Make sure you set aside some money each month to cover those little unexpected emergencies that never seem to come at a convenient time.
It may not be an easy journey, but being Credit7 free is one of the best destinations I can think of. I know. I've been there, done that, and have the t-shirt.
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