Life is unpredictable. Financial setbacks can befall anyone, but with hard work, planning and discipline, recovery is possible and often achieved. Along the way to recovery, you might develop different attitudes and goals -- ones that lead to happiness and fulfillment in unexpected ways.
A Budget Is Your Buddy
Your first step to financial recovery should be to take stock of your situation and, if necessary, adopt a more modest lifestyle. A good place to start is to prepare a budget based on your new circumstances. Doing so forces you to confront your current economic reality and provides a path toward regaining control. Of course, a budget is only valuable if you track it and make decisions based on it. You can use Quicken to establish and track a budget, plan and pay your bills, and keep all your financial accounts up to date.
Clean Up Your Credit Report
You have input into your credit report
, a power you should exercise. Realize that there is no quick way to repair your credit history, but there are ways to strengthen it over time. To begin, request your FICO credit scores and credit reports from the three major credit bureaus. Examine each report and correct any errors or omissions -- the bureaus have standard procedures that allow this. Delinquencies, foreclosures and bankruptcies will remain on your credit history from seven to 10 years, but unpaid tax liens remain indefinitely, so it's wise to make paying back taxes a high priority.
Road to Recovery: Consolidated Debts
If your budget reveals unsustainable monthly debt payments, consider consolidating your debts
through a reputable credit settlement company. The company consolidates your debts from various sources, including mortgages, personal loans, credit cards, student loans, IRS liens and payday loans. You then make one affordable payment a month. It's a good idea to comparison shop among a few credit settlement companies to find the one with the best terms, such as the lowest interest rates, lowest fees or smallest monthly payments. The repayment plan stretches out your payments, which means that it takes longer to repay your debts and that you'll be paying interest longer. Credit counselor Joel Pate observes, "A good credit settlement plan is a clean, conservative way to pay off your debt, repair your history and leave enough money in your monthly budget to get on with your life."
Rebuild Credit, Be Happy
A secured credit card
can help you rebuild your credit score despite a financial setback. You typically apply to your bank for a secured credit card, keeping sufficient funds on deposit to cover your card's credit limit. Not all secured credit cards issuers report transactions to credit bureaus, so inquire before you sign up. Your credit score should begin to increase when you use the reported card regularly and repay the balance in full and on time each month. As your credit score improves, you might be able to qualify for a regular credit card, automobile loan or even a mortgage. A disciplined approach to spending and conservative use of credit goes a long way in helping you to recover from your financial setbacks. "The road to financial happiness might be a long one, but the best time to start your journey into economic recovery is now," says Pate.