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Retirement Planning: Will You need a Credit Counselor in 2009? January 1, 2009

Posted by retirementwithaplan in From Retirement Planning for the Utterly Confused, retirement.
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When do You need a Credit Counselor?

At what point do you know that the best help for your budget lies outside of your efforts? When do you need to tap the services of a credit counselor? For many of us as we enter 2009, this will be part of rebuilding our retirement plans.

The Language of Credit Counseling

A credit counselor offers you a plan to manage your money and help prevent further damage to your budget and in the case of a good credit counselor, offset future financial difficulties by aligning your cash inflow with your debt outflows. This no easy task.

Numerous people wait too long to tap these services leaving the very thing you are trying to protect – your credit score – in greater jeopardy. One of the first things you can do, even if you are one of the 30 million or so people who face overwhelming debt burdens, is to talk about it among yourselves. If you are couple, the dialogue should be open and frank and done without animosity.

Many couples do not exist on the same page financially. One can be spender while the other half of this financial union may see the consequences of such actions as anything but damaging. In times when the economy is doing fine, these differences can often be put on the back burner. But when the tough times arrive, these differences are amplified.

The suggestion that the two of you sit down and have a frank discussion about money may be too difficult and during times of stress, find the topic of money management all but impossible.

Do not play the blame game. Both of you are guilty of something that, as many of us have found, is not necessarily our fault. There are three things that can help you identify the need for outside assistance:

You are unable to identify needs from necessities.

  • Necessities are the basics of life: shelter, food and transportation costs to get you to and from work. In many instances, these can bills can take more than sixty percent of your combined incomes. (While serving your outstanding debt can be considered a necessity, it will not be grouped into protecting your family from the elements and possibly jeopardize their health.)
  • Needs on the other hand are quite different. And much more difficult to rationalize. Let’s start with your cellphone. This is not a need. You do not need to text or have internet in a hand held device. Your connectivity to the rest of the world is not as important as you argue it is. Ask yourself whether your life has improved with this device over just a few short years ago when such services where not available.
  • You may rationalize that phone for emergencies but few of us are faced with life and death situations that require us to stay connected. The average family of four can trim $100 a month by limiting text (if not eliminating it altogether), online access, hands-free devices, and the numerous add-on services offered when you sign the contract.
  • Having a cellphone without a contract is much more expensive. Buying minutes as you need them will always cost more and create a necessity where there should not be one. If your credit is too damaged to get a cellphone through conventional services, your “need” for a mobile phone is simply not worth having. Stick with a landline.
  • Second on the list of necessities confused as needs is your television. Numerous people are paying over a hundred dollars a month for a service that can cost as little as twenty bucks. Basic cable usually consists of channels 2 through 13 or what is considered as the major TV network stations. Add those channels beyond those and your bill can triple. Throw in some add-ons like on-screen guides and pay-per-view availability and your cost for simply turning on your television is now more than fifty dollars. Add a premium channels such as HBO or Showtime and your bill now stands at $100.
  • It doesn’t stop there. Many of add on internet access – the faster the better to this bill, which can bring the total bill for your entertainment to almost two hundred dollars.

The second item on our list to determine whether you should seek outside help is the inability to decide who gets paid and who does not.

  • If you have missed so much as one payment or been late by as little as a day, you have done damage to your credit score. Finances are not meant to be juggling act, with each month bringing a new list of judgments on which bill is more important that the others.
  • In this century, the interconnectedness of your credit history cannot be avoided. Miss a payment to a creditor and your insurance provider may raise your monthly premium. Miss multiple payments and you may be canceled by an insurer.

The third most telling sign that you may need a credit counselor is your health.

  • The consequences of financial stress do have a direct affect on your ability to sleep, to eat well, and to face your family. This financial timidity is not uncommon. If you have never told your children that your family is facing some financial difficulties, now is the time. They will be forced to contribute in ways they may not have in the past. Allowances may be cut, luxuries may be eliminated and the what was considered normal life will look completely different – especially after the visit to the credit counselor.
  • Many formally middle class households now teeter on the edge of poverty and those that used to think of themselves as financially immune to economic downturns are realizing that they are not. One job loss can force the unraveling of life as you know it.
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