By: Al Krulick of Debt.org
Regardless of what your broker, your brother-in-law, or that out-of-work actor on the TV commercial tells you, there is no magic formula to winning at the stock market.
Sure, there are better and worse strategies, but if we could all predict how the Dow Jones or the S&P would do on any particular day, week, month or year, we’d all be Warren Buffet. And even he must have some losing streaks from time to time.
So your investments didn’t quite work out the way you had hoped. Maybe it wasn’t stocks. Maybe it was a real estate investment trust that didn’t pan out; maybe you got caught with too much gold when gold took a dive; maybe your horse didn’t place or you bet on the wrong basketball team.
What matters is that, for whatever reason, the funds you thought you had, you don’t have anymore. They’ve decreased, shrunk or vanished altogether and now instead of being flush, your debts are staring you in the face. Somehow, you’ve still got to manage. Here are some tips:
Don’t Panic – There’s no point in freaking out or blaming yourself, your financial advisor, or even your brother-in-law. And the guy in the TV commercial can’t hear you no matter how loudly you yell at the screen. Anger and anxiety will just prevent you from thinking rationally. So calm yourself and run the numbers down to your last dime. What do you have in your savings and checking accounts, retirement plans, insurance policies, home equity, projected income? What are your short and long term debts? Which debts are secured, like your mortgage or car, and which are unsecured, like your credit cards.
Keep the Lights On – Make your secured debts your highest priority. You need a place to live and transportation, so pay your mortgage and your car loan, or the bank will come running – not to mention the repo man. Also pay your utility bills. You can’t write checks in the dark. Contact your unsecured creditors and explain your situation. If you can show them that you’re attempting to settle your accounts, but need a little more time or perhaps a payment modification, they can surprisingly understanding.
Get Help – If your unsecured debts, like overdue credit card balances are seriously in arrears, you may want to consider contacting a debt relief company with experience in debt settlement and debt consolidation. A debt settlement plan can help you reduce the amount you owe and/or arrange for a reduction in late fees and penalties. Debt consolidation can help lower your overall interest rate. A credit counseling agency can help you put together a debt management plan that will allow you to chip away at your debts over time.
Change Your Spending Habits – Whether your investments turned sour due to your own bad decisions or to factors beyond your control, you’ve still got to cut your expenses. Put the credit cards away, stop impulse shopping sprees, eat more dinners at home and postpone all non-essential purchases. Most important: Don’t run up any more debt while you’re still trying to repay the ones you already have.
Stick With It – Managing debt requires commitment and perseverance. Even successful investors had down periods they probably wouldn’t want to go through again. Think long-term and have the determination to plod through this rough patch. There may not be a real pot of gold at the end of the rainbow, but your personal financial storm will pass. It always has.