Personal freedom rings in the hearts of Americans around the nation but financial freedom may be another story. In recent years, news headlines have been filled with the stories of families unable to make ends meet after losing their jobs or losing control. As more consumers are beginning to buckle down and get serious about the debt problems, there needs to a focus on one key area of personal finance that can make everything else better.
Why Repair Means Everything
When you are working on repairing your finances, you need to follow a certain type of order and have discipline to ensure you reach your goals. It’s good to pay off your debts and stop spending but in order to have total financial freedom there are other areas of personal finance that needs attention.
Repairing your credit should be the ultimate goal you set for yourself. Filter all other activities under that goal and you’ll be well on your way to financial stability. As you achieve better credit, you will also be working through the other steps that need attention and will bring your money matters back on the right track.
Taking the First Step
Credit repair involves a lot of different elements. As you work through each of these individual tasks, you will come out in the other side both debt-free and more financially independent than you likely have ever been.
Here are the steps of repairing your credit and your overall financial outlook:
Order Your Credit History/Score
You need to know where you stand credit-wise before making a move. Order your credit reports from the three major credit-reporting agencies TransUnion, Equifax, and Experian. All consumers have a right to a free annual copy of their credit report or at any time they have been denied credit approval for a period of up to 60 days. Credit scores are never free but for a nominal fee you can access each of your credit scores from the reporting agencies. You do not need to join any memberships in order to get a free credit report so don’t waste your money on the various scam-like promotions.
Evaluate Your Debts
You may think you know who your creditors are and how much you owe but you need to review your credit reports for accuracy and information. Your credit report will show you exactly who your creditors are, where they can be contacted, how long your account has been open, and what your outstanding balance is currently. Sit down with your reports when you have time and review all of your information. Dispute with the credit agencies all of the erroneous information contained on your credit report. The agencies have 30 days to investigate your claim and make changes to your reports. Incorrect information must be removed from your report which can improve your credit score.
Plan Your Debt Attack
Once you know who you owe, you need to construct a plan for paying off your debts in full. This plan should involve setting up a budget for your current expenses if you do not already have one in place. From that budget you should be able to see how much ‘leftover’ money you have to use towards debts. If the amount is insufficient, you’ll either need to cut existing expenses or earn additional income. Configure a plan for eliminating your debts in some kind of order such as the smallest to the largest balance or the highest to the lowest interest rate. Make your plan of attack and stick to it.
Keep Up With Regular Expenses
When you are working to pay off old, outstanding debts, it is just as important you keep a focus on the monthly bills you are also obligated to pay. Missing just one regular monthly payment can drop your credit score and potentially jack up interest rates on your account. That means you’ll have worsening credit and have to pay more money each month. Timely bill payments are a large factor in your overall credit score.
Refocus Your Finances
Once your debts are being eliminated and you find you have more stability in your finances, start figuring out ways you want to use your money for a better future. Saving and investing your money is the only way to ensure a stable present and a healthy retirement. Learn new ways of more effectively managing your money.
Live Within Your Means
The primary lesson every consumer needs to learn is how to live within their means. Overspending and poor management of money is the root cause of debt and bad credit. Learning to live with what you have and stop spending what you can’t afford is necessary for stability in financial matters. Learning your lesson will help you prevent history repeating itself. As you move forward into your next financial phase, one that may require financing or new lines of credit, your improved credit score and better focus on personal finance will ensure you save more money and have plenty more options available to you.
Repairing credit is not difficult but it does take time and some patience to see you through to your goals. Contrary to promotions from some agencies, there is no overnight fix for bad credit. Only hard work and dedication to having better credit and being debt free will turn your personal financial life around.
Ed O’Brien is a seasoned writer in personal finance, specializing in credit repair. You can find more of his articles located at CreditRepair.org.
You are absolutely right about setting goals to achieve financial freedom. When your finances are stable you grasp the American Dream.