Several months ago at about 5:00 in the morning I was driving my husband, Paul, back to the airport. He had come up with me to PA to stay with my family for five days, and then I stayed on to spend extra time with everyone while he returned to work.
I knew roughly how to get to the airport, but asked my mother to write down directions just in case. Instead, she gave me her GPS. When it told me to exit onto PA-3 from 202 South, I knew that I should not have. But then again, what do I know compared to a machine? So we did, and ended up taking several hilly, unlit, back roads through neighborhoods with lots of stop signs. Did I mention that this was on the way to an international airport in a major US city?
It was kind of ridiculous.
I don’t own a GPS, and have no desire for one. I even turned off the GPS function on my cell phone when I found out that it would automatically furnish my Facebook family and friends with my location on each status update (yes, police can still find you through your cell if you turn yours off too. I checked).
It seems that every time I have used someone else’s GPS I get a bunch of snide “recalculating” remarks from Garmina, or I get sent on a wild goose chase. Yet I can’t deny that we eventually got to the airport. In fact, every time I have used a GPS I've successfully made it to my destination, albeit a little worse for wear and with a few good U-turns thrown into the mix to keep things interesting.
No matter how much I dislike them, owning a GPS has its pros.
One of the strong suits of a GPS is that it will get you out of any situation. You can take as many wrong turns as you want, and it will recalculate a whole new way to get where you want to go. You can get lost in the middle of PA and hit the “home” button, and sure enough, it will guide you. It just may not be the route that you would like to go.
The same is true of dead end financial situations you may be in. You may know where you want to go, but along the way you are taken on routes with obstacles, stop signs, and forced to make questionable U-turns.
Let me show you how to “recalculate” your way out of some of the worst of these financial situations.
Living Paycheck to Paycheck: Recalculating
Living paycheck to paycheck is very stressful. It means you are juggling the entire month long, waiting to pay certain bills until you reach payday, timing account transfers and direct deposits, and waiting. You can’t ever get ahead financially—barring a decent pay raise—because there is no room to save money. When the occasional emergency pops up, the juggling takes on a whole new level of intensity, and sometimes other bills just don’t get paid.
- Build Up an Emergency Fund: I know, I know, I already mentioned (and you already know) how difficult it is to save when you are living paycheck to paycheck. But there are some ways to accomplish this that you may not have thought of. Have you had a large tax return in recent years? Check with your HR to see if you can adjust so that your monthly paychecks are larger instead of getting it all at the end of the year. If you are paid every other week, then two months out of the year you will receive three paychecks. Instead of spending the paycheck (or allowing it to magically absorb into thin air), purposefully deposit a chunk or all of it into your savings account.
- Focus on One Category of Spending and Whittle it Down: It may seem overwhelming trying to figure out where to start when it comes to decreasing your expenses. But if you choose just one category (food or entertainment, or phone/internet/cable) and focus on whittling it down, you will begin to make some headway. Next month, choose a different category. As an example, you can challenge yourself to cut your food bill by 30%. You might not be able to, but by setting such a lofty goal you will be sure to be in a better position than if you had never set the goal at all. Here are some ideas for saving on fixed costs such as your home or rent.
- Share the Load with Someone Else: You can cut your bills significantly in a short amount of time by taking in a roommate/housemate, or carpooling back and forth to work. Yes, this will be a big change for you. However, it will also lead to sizable breathing room in your budget. Plus you never know who you may meet. My Aunt has been renting out rooms in her D.C. home for decades, and every time I visit her I meet someone new and interesting.
Denied a Mortgage Due to a Low Credit Score: Recalculating
If you wish to purchase a home and need to take out a mortgage (like most people do), then you have to care about your credit score. Having a low score means you may be charged a high interest rate—a costly mishap on such a large loan—or be denied all together.
- Keep Your Income to Debt Ratio Low: Any debt that you can pay off, even the debt you carry until just before the grace period ends for the sake of rewards, will help your credit score. This is because your debt-to-income ratio will decrease.
- Check Your Credit Reports and Correct Blemishes: Obtain a free copy of your credit reports (on AnnualCreditReport.com) and look them over. If there are blemishes on your credit report, then you may be able to clear them up by contacting the creditor/lender directly and making a deal. Try to negotiate that upon settling with them, they will report a zero balance to the credit bureaus (and get this in writing).
Stuck In a Payday Loan Cycle: Recalculating
The problem with short-term payday loans is that the interest rates are so exorbitant that they tack on lots to the principal and you end up owing more than you can pay back from your next paycheck. If you are living paycheck to paycheck—likely if you found yourself at a payday lender counter—then you have no additional funds to pay off the interest. And so the loan continues to compound and grow. It is not likely you will be able to break a Payday loan cycle through your paycheck alone.
- Contact the Payday Loan Lender and Ask for Interest to Cease: Some people have had luck with contacting their lender and coming to an agreement where if they make specified payments on the loan, no additional interest will accrue. It really will depend on the lender and person you speak with, so good luck to you!
- Make Early Payments: If you can swing it, paying your loan early will decrease the overall amount due (most loan payback amounts are setup assuming that you will pay on the next due date). Even paying a few days early can help cut down on the amount of interest being tacked on.
- Find a Quick Infusion of Cash: I do not mean taking out another loan, but rather finding a way to earn extra money just long enough to pay off the payday loan and put you on solid footing so that you do not need to take another one out. This could be extra hours/shifts at work, getting a weekend job, posting your services and getting new clients, selling part of your belongings, taking in a roommate, etc. Anything you can do to increase your income will help. While this will help you short-term, try to think of ways to continue pulling in extra income so that you don’t start in the cycle again. If nothing else, keep the second source of income long enough to build yourself an emergency fund (aka antidote to payday loans).
Just like our bumpy, back road journey to the airport, you will find your way to where you want to be. It may not be the route you desired, but keep that end goal in mind no matter what. Doing so will help you to make the kinds of solid financial decisions you need to make in the short-term to ensure your safe arrival.