You Are Not Your Financial Situation

January 27, 2015

When I tell people what I do for a living, I almost always get questions on how to become financially secure. As I started to talk to people, I noticed that a pattern started to emerge. People started connecting themselves to their financial situation vs. seeing their situation as a temporary situation.

Worse yet, this connection paralyzed them from taking the first steps to building a better financial foundation. I found I had to sit all of them down and make them repeat after me, “You are not your current financial situation” and “It will get better.” I found that once we could get past the hump of feeling defeated, the rest was a little easier.

Identifying with your current financial circumstances can cause fear and anxiety. This fear and anxiety has caused some people to not open mail from creditors. To quote Franklin Roosevelt, “The only thing we have to fear is fear itself.”

The first step to getting over fear is to face it. Open all of the mail you have been receiving from your creditors and face your debt. Understanding how much debt you have and the status of your debt is an important step. Debtors threatening liens and garnishments, particularly those coming from the tax collectors and student loans, should be handled immediately. All other debts can wait until you create a budget.

When I talk to people in financial distress, I always ask if they created a budget. Most have not. When I ask why, the number one reason I hear is because they are scared to see how little money they actually have and that they find the budgeting process to be a reminder of their current situation.

Again, you are not your current financial situation. A budget is simply you telling your money where you need and want it to go. You decide what is important to you. You decide how much money to put in each category.

A budget ensures that your money is going toward the things that matter the most to you. For those of you who are knee deep in the trenches of too many bills with too little greenback for protection (sorry I am ex-military), prioritize your income around food, shelter, utilities and transportation. Whatever is leftover is what can be used to negotiate with creditors.

I would recommend setting aside a small portion. Even if you have to start at $25 a month, you can consider it the beginning of a mini emergency fund for things like a flat tire, unexpected school trip or higher than average utilities. Ideally, a rule of thumb is an emergency fund should cover 3-6 months of expenses.

I have found that once people realize that their necessities are covered, anxiety starts to go away and it becomes easier to handle the debt. After you have an understanding of how much money you have to pay your debts with, contact your creditors. You can either handle this yourself of if you feel like it is too much for you to handle, you can contact a nonprofit credit counseling agency for help. Also, if your employer offers an EAP service, check to see if financial counseling is part of their service.

Please do not let the embarrassment of your situation prevent you from reaching out for help. If you are in a financial crisis, your best defense is to over communicate with your creditors. If your crisis was due to a hardship-divorce, fire, death, or loss of income, then you can contact the hardship department at your creditor and negotiate payments. Facing your financial situation is the first step to achieving the financial security so many people desire.