Photo Courtesy of pedrosimoes7 (flickr)
My wife and I were recently smacked with a $3,000 dental bill. We never saw it coming. One routine dental check-up turned into a near catastrophe that could have completely wiped out our monthly budget and lifestyle. Fortunately, we were blessed with a larger than normal tax refund this year and managed to cover the bill in full without too much hassle. If it wasn’t for the tax refund, we may have faced some difficult decisions. In the past we have faced similar experiences, some we overcame and others we’re still dealing with.
Last summer, just a short time before moving to Nashville from Boston, I quit my job under bad circumstances and found myself unemployed for the fourth time in two years. Not a great track record, I know. This time was different because I was only a few short months from getting married and I was responsible for more than myself. I had debt from Boston I was still trying to pay, new bills from the new apartment, and a savings account that wouldn’t last me more than a couple weeks. At that point, every bill seemed unwanted and unexpected, and I was unable to pay. Needless to say, times were tight. I managed to delay some payments by applying for a hardship deferral, my parents kicked in some, my wife’s parents kicked in some more, and I searched for jobs faster than ever. Within six weeks I was working again and had narrowly escaped major financial turmoil.
How do you respond to bills that come out of nowhere? As a recent grad or someone who recently acquired more responsibility than you’re used to it can be insanely shocking to have bills laying on your desk that are asking for more than your college tuition. Take a look at the advice below and let me know what you think. What shocking financial experiences have you dealt with recently? Tell your story in the comments below.
What to do
1. Smile! This is a Great Opportunity
It may not look like a time to smile, but believe me, if you don’t, you will only drive yourself crazy. Money is obnoxious. It’s essential, but can be very obnoxious much of the time. Don’t get your panties in a twist over a bill. It’s just not worth it. Even if it looks like you might go bankrupt because of the crazy amount of money you now owe, don’t forget to breathe and enjoy the experience. People who go bankrupt survive and usually bounce back smarter than ever before. You’ll have to find the silver lining in the experience and look for every chance to learn a stellar financial lesson you can pass on to others. Donald Trump, Dave Ramsey, Steve Pavlina, George Forman, Willie Nelson, and Thomas Jefferson are just a few successful people who went bankrupt on their way to wealth.
2. Lay out Your Options
What can you do? Get out a piece of paper and write every idea down. Seriously. It helps to get your anguish out of your head and onto something tangible you can rip to shreds later. Why do you think I wrote this blog post? It’s therapeutic. The visual of seeing your options laid out before you will allow you to set aside some of the emotion for a second and actually make logical decisions. That’s the goal. Remove the emotions as much as possible and look at what you can do. Chances are that you know what you have to do and it’s simply difficult to admit it. Writing down your options will allow you to cross everything else off, narrowing your vision to that one option, and forcing you into action. Don’t worry, this is a good thing.
3. Talk to the Right People
Analyze your situation from the perspective of someone who doesn’t care, which will probably be someone you don’t know very well. Find an expert: an accountant, a parent, a friend with a brain, a stranger who has experienced this sort of thing before. Speaking of that, if you would like to email me with your current problem I can take a crack at it. I’m not claiming to be an expert but I do like solving financial puzzles every now and then. The goal is to get a second opinion and some fresh eyes on a problem you may not be able to solve alone.
4. Get Analytical for a Second
Get out the calculator, a pencil, and a spreadsheet: it’s time to do math! More often than not, you will be able to find the money in your budget somewhere to cover what you think you can’t afford. Start cutting the excess out of your life and focus only on the essentials. Things like food, water, shelter, electricity, clothing, and transportation are good expenses that you should keep. Outside of those areas there aren’t too many expenses you simply can’t live without. Also, don’t forget to brainstorm some snazzy ways to make a little extra cash on the side. This may involve a part-time job, a quick business idea, or begging on the exit ramp of a highway. Do whatever matches best with your skill set and time.
5. Switch Your Habits
Bad habits are the result of consistent bad decisions. Bad decisions may not be the cause of your recent financial stress, but they may be hindering your ability to overcome the obvious. Wealthy people faced obstacles, just like the one you’re in, to get where they are. There are countless millionaires who began as beggars, so to speak. Altering your behavior on a daily basis will make the difference between you and the millionaire. Making great choices about your money today will result in you creating wealth tomorrow. Find the spending habits that are weighing you down and cut them. Create positive habits that will draw your closer to the financial success you are pining over.
6. Re-examine the Value of Money in Your Life
The unexpected expense in your life may be the cause of bad luck, random circumstance, or fate. However, many, if not most, challenging financial debacles are caused by poor choices that lead to more poor choices. If the money issue is causing stress, ask yourself why? Why do you care so much? What is it about the money that is making you freak out? Do you have a realistic perspective on money? Do you understand how it works? Could you benefit from educating yourself on money before reacting to the current scenario? Money is simply a tool to barter for goods and services your desire. Find other ways to barter for what you want. Find creative alternatives to attract more wealth in your life. Look for methods to contribute and add value to society that provides a financial windfall for you in return.
7. Plan to be Shocked Again and Again
Yes, you need an Emergency Fund. The reality is that what has happened to you may never happen again, but something else will. It’s a guarantee. You will face unexpected financial burdens over and over in your life, but there is plenty you can do about it. Expect the unexpected. Start a savings account, put cash in an envelope under your bed, pan for gold in California, just create a way to have something on hand to protect against the things you can’t see coming. You won’t be able to save enough for everything, but just save something. As you build your savings you can spend more time finding ways to boost your income and increase the Emergency Fund year after year. The unexpected usually challenging, but it’s always an opportunity for growth.
*Please Don’t Borrow Money
That’s right. I hate debt. I even wrote an entire blog post about it. In the course of you fixing your finances you will not build new positive habits, improve your long-term success, or even allow personal growth if you jump straight to the plastic. Find a way to pay for the bill with CASH. This will sound backwards, but it is better for you to NOT pay the bill on time and work the debt down with cash than to borrow the difference on a credit card and try to make it work sometime in the future when you “figure it out.” The time for figuring it out is NOW. You will not grow unless you make difficult decisions. You will not improve unless you learn something and take action with that knowledge. Borrowing money inhibits your ability to think and completely bulldozes your self-worth because you end up borrowing from Peter to pay Paul. Stop the bleeding as quickly as possible. There. My rant is done. If you completely disagree feel free to throw your opinion in the comments below. I will personally read every one.
The Clueless Graduate,
Jeff Sanders
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Disclosure of Material Connection: Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
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