How to recover after debt settlement
Recovering after any financial setback can seem like a daunting task, but I assure you, you can do it. The most important thing to remember is where you came from and how much it cost you to gain financial freedom from your debts! Never forgetting the past and learning from it are powerful tools and great motivation to move forward. Getting back on your feet financially requires all of your focus and constant monitoring and review. Here’s how to get back on your feet after debt settlement:
1. Check with your tax professional. He should have done this before negotiating his debt settlement and the IRS Form 1099 shouldn’t surprise him. Make sure you have done your income tax planning so you don’t end up owing the IRS!
2. Build a emergency fund: I’m a big fan of the Dave Ramsey show, for the most part. One of my favorite tools that Dave always advises is that we start with what he calls a “Murphy account.” Murphy’s Law says that anything that can go wrong will go wrong. Therefore, a Murphy account is a savings account that you set up immediately with a minimum amount of $1,000.00 and continue to accumulate these savings. Then, when Murphy calls and gets a flat tire, he needs car repairs, a new fridge, or dental work; you can use this emergency fund for these events. If you use this account, you must work hard to replace those funds next time.
Gone are the days of having a credit card for emergencies, and haven’t you learned how hard it is to get out of debt? So why go back? Promise yourself that you will never come back. You don’t have to anyway with an emergency fund [aka a Murphy Account].
3. Live and die for him Budget! There is no magic wand, no pill you can take, and no “get rich quick” scheme that will magically transport you to your financial goals. The only way to get ahead financially is to spend less than you earn, period. A budget is a requirement and there is no way around it. Make it fun by doing what Dave Ramsey calls ‘pre-spending’ your money before you even get it. Review your budget every month to see where your money is going. Over time, you’ll start to see patterns in your spending and you’ll look at each bill and wonder how you could reduce it.
Examples include unplugging appliances to lower your electricity bill; remove those extra TV channels; ask your insurance agent if you need that additional insurance; learn how to make a mini version of your own ‘extreme coupon’ game to save at the supermarket.
Four. plan your future. No one can do this for you, and I certainly don’t expect to live well on Social Security alone, anyway. Many financial experts provide free consultations, and you should at least take the opportunity to ask questions to help you set your goals. You may be working hard to pay off a mortgage, send your kids to college, create a retirement account, etc.
Having the right insurance policies and the right amount of insurance coverage is also important to protect everything from your health to all of your assets. Speaking of assets, have you also considered that dreaded conversation about estate planning? Stop shirking your financial responsibility and put your plan in writing.