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If last year’s financial crisis has you tied in a knot and dreading the new year, don’t. You can have a good 2010 if you alter your thinking and see the new year as an opportunity to start fresh and accomplish dreams you never thought possible. If your finances got wrecked, you can start over. If you lost your job, take a chance and try something new. If your business is ailing, the new year is a great time to identify the cause and launch a new, improved enterprise. If your life has taken a turn for the worse, know that this is not the end, but it may be a new beginning. As long as you have breath, there’s a reason for you to be here. Your experiences and talents are needed to make a difference in the lives of others. Whatever crisis you’re dealing with, it’s just a point along the way to where you’re going. As we begin another year, take this time to reset, recharge, and reclaim yourself.
RECLAIM YOUR FINANCES
Last year, Angela Logan was months behind on her mortgage–she owed more than $15,000. After getting a home equity loan two years earlier to pay for renovations, her mortgage went up from $295,000 to $367,000. Monthly payments were now $3,085. Logan, 57, had lived in her Teaneck, New Jersey, home for 20 years but now faced foreclosure. An actress, Logan hadn’t been getting assignments, and her fiancÃ©e, a comedian, also lost his gig. Furthermore, Logan says the contractor botched the job, which cost thousands to correct. With little savings, she racked up $40,000 in credit card debt. “When the economy flipped, we flipped. We had to do something,” she says.
Logan contacted a credit counselor, who helped her devise a budget, cut spending, and find ways to generate income. The counselor also told Logan about the Making Home Affordable program. She qualified for a modification, reducing her monthly payments by $500. Then she had another idea: baking cakes. She sold a favorite family recipe, now dubbed Mortgage Apple Cake, for $40 each. She told people she was selling cakes to save her home, news outlets took notice, and orders poured in. Bake Me a Wish, a bakery and cake delivery company, offered to assist with production and shipment. The company has licensed her cakes and is mass producing them, giving Logan 10% of the profits.
The reinvention: By becoming cost-conscious and increasing her income, Logan gained a handle on her payments and says this crisis prompted her to re-evaluate the way she handles money. Now she sticks to a budget, pays down debt, and buys only what she can afford. “I watch everything now,” says Logan. “It’s important to look at what you’re spending and how you’re living.”
If you’re recovering from a financial setback, here are five ways to reclaimÂ your finances:
1. Get help. The first sign of trouble is reckless spending and creeping debt. “A red flag is when you don’t have control over your money,” says Aaron Smith, a registered investment adviser, or RIA, with A.W. Smith Financial Group Inc. in Glen Allen, Virginia. A financial planner can help you see and correct your errors. “We often overlook the areas a professional scrutinizes. But they can undermine you,” says James Richardson, a certified financial planner with Ameriprise Financial Advisors in Raleigh, North Carolina. If foreclosure or bankruptcy is looming, see a credit counselor first. An attorney can also offer guidance and alternatives.
2. Develop a plan. Your plan must be more than a list–it should encourage behavioral change. “Acting on a financial plan is what makes it living and effective,” says LaToya Parker, a certified financial planner with Infinity Financial L.L.C. in Atlanta. Include items that will prompt you to change bad habits. “It can be as simple as not buying a daily cup of coffee,” says Parker.
3. Leave home without it. Credit is not meant to bridge the gap when you can’t meet your financial needs. Pursue a cash-only lifestyle until your debt is under control. Don’t charge any item you can’t pay off by the end of the month.
4. Add income. “If cutting back isn’t working, the only way to get a handle on debt is to earn more money. Sometimes people cut living expenses to the bone. At this point, you need to add additional sources of income,” says Parker.
5. Find a money mentor. Habits–whether good or bad–are learned. Find someone who is good with money and ask him or her to mentor you. Ask this person to be your “money mentor,” Smith suggests, by showing you how to develop and maintain good financial habits.