Eliminate Shame from your Game

One of the biggest challenges people face when they face financial hardship is acknowledging that fact to those who don't (or even sometimes do) live in their households. As referenced in the Bible, 'Pride cometh before the fall'. Many financial burdens can be eased by simply communicating with your mortgage company, car loan holder, credit card company, etc. before they've tried to track you down with repeated mailers and phone calls.

Most industry experts agree that taking a proactive approach towards your financial concerns is a more effective way to handle the stress that it puts on you and your family in the short and long term. Let's be frank, financial problems rarely sneak up on you. Most people don't wake up suddenly 30 days on their mortgage. When you see those issues start to become a reality, take a few proactive steps.

1. Call your debtors, let them know what the situation is and how important it is to you to protect your good credit standing. If your problem is short term, ask them if they can defer a payment to the end of your term. If it's a more long term problem, ask if there is a way to restructure your debts so you are better able to meet the obligation. You will be SHOCKED at how willing some banks and lenders are to working with you to keep your payments current. Remember, they make their money LONG TERM from you paying them every month. When your debt goes bad, they can't make any more money from you. It becomes a loss to them so they greatly benefit from helping you remain a loyal & paying customer.

2. Make a plan that's doable for you and stick to it. While banks and lenders are willing to work with you, they are less willing to do it over and over again. If you make a payment agreement/arrangement do all that you can to make sure you can honor that agreement. When you make it initially, make sure it is actually something you can afford and remember it's a short term solution in most cases. Banks and lenders may defer interest for a short time, but they aren't going to do it for the life of the loan. Take the steps while you are catching up to arrange your budget to be able to get on top of things sooner rather than later.

3. When all else fails, prepare to sell and move on. In the housing industry, the newest trend is 'short sales'. This is when a house is worth less than the mortgage balance and the bank agrees to take the lesser amount in order to salvage some of the debt. It's cheaper for a bank to take a $20,000 loss on a short sale than it is to lose $200,000 in a foreclosure. If you are in a situation where you are not going to be able to handle your escalating payments, take the steps to sell your property before it's too late. The keys will be to get the property to a stage where it's appealing to buyers-paint, clean up, trim shrubs, plant fresh flowers. Also, price it right for immediate sale. For example, if you live in a neighborhood where homes are selling for $200,000 then price yours at $190,000. Remember, even if that's less than what you owe, the bank will likely negotiate and accept the lower price without further dinging your credit. Your ultimate goal is to minimize the long term effect on your credit.

While financial problems can take an emotional toll on you, your family, your friends and those close to you, they don't have to be the cause for total ruin. Taking a few steps to get ahead of the problems now can put you in a much better place down the road.