Budgeting, Credit, and Debt II

One of my readers, "indebted college kid," who tackled a developing credit issue early, has lead me in the direction for this next Budgeting, Credit, and Debt topic. I would say her approach to a developing problem was an inspiration. And, I would like to thank her for moving this topic series forward.

In brief: "indebted college kid" had a unique situation in which she became ineligible for student loans when a grandparent kindly paid off her student loans. When she realized that she would have no money to live on, she turned to credit card, only to realize shortly later that she had a debt problem on his hands. So, she changed course. She took a semester off of college, worked in heavy labor, and became debt free in seven months.

--> Rule of Thumb: You have the power to change your situation. Following Yom Kippur, we start anew, so to speak. Forgiven for the deeds of the past year, we are free to move forward and concentrate on the challenges of the new year. And, it almost seems appropriate to write a post about changing one's direction today, as we all have a new slate.

I am a believer that financial issues can be tackled and one's direction can be changed, with a great deal of desire. However, just how one should go about fighting their own battle is as unique as each situation. Some battles are far more complicated (especially when the "Ortho" part of the "nomics" is the major issue), other battles easier.

But, every challenge requires:
1) A recognition that the status quo cannot remain,
2) A desire to change the situation at hand,
3) A (written) plan of action,
4) A ton of self-discipline, and
5) A monitoring plan.

--> Rule of Thumb: A person need not be in debt to have a potential issue. From the outset, I should say, that while it appears that this post is only for those with current credit and debt issue, those who face potential issues in the area, need not actually be in debt.

In future posts I hope to address budgeting issues, and some of the topics will be about building a cushion into one's budget and starting an emergency fund. Unfortunately, an increase in utilities (check), an increase in gas prices (check), or an increase in any other area of regular spending (check), can spell disaster without a cushion in one's budget.

When I hear some of my friends and neighbors (who do not carry much debt, if any) say that it was an open miracle, that they were able to pay their rent for the month, I worry for them (somebody has to worry, right?). While it admirable to be able to see Yad Hashem one's financial life (those of us who do not live "on the edge" can probably admit it is easier to see your own hand, rather than Hashem's hand, in our own financial dealings), it also means that you face a number of potential issues-financial and halachic-should you find yourself in a cash crunch.

For example, who do you withhold payment from, or what business do you withhold payment from, when you don't have funds to pay? Do you borrow to cover payment even though doing so will propel you downwards?

--> Rule of Thumb: There is no time like the present. Allowing financial issues to fester, by shoving them under the rug and praying that they will go away, is disastrous. Chances are, not only will they not do away, but they will increase. There is no time like the present to start monitoring one's financial situation and making changes where necessary.

I hope to address a few tools that can be used to monitor one's financial situation in the next post(s):

1. Monthly budget tracking and budget summary.
2. Cash Flow Analysis.
3. Assets and liabilities monitor.

And, now for the discussion question. Based on the now infamous "Jewish Debt" AskShifra post, credit and debt issues, as well as exhaustion of resources, appears to be widespread. For those who are (or have) faced debt issues: when did you know that you were heading in the direction of financial trouble?