Many people face a financial crisis at some point in their lives. But you can prevent your financial situation going from bad to worse by living within your means and taking the following steps to repair your credit.
Whether it is the result of a family illness, poor financial planning, or the loss of a job, sometimes it can feel like your finances are spiralling out of control. If you ever had trouble paying your bills, or have had accounts turned over to debt collectors, you are not alone.
Develop a Budget
First, you are going to need to do a realistic assessment of your finances to determine how much money you take in and how much money you spend. List all of your income sources followed by all of your fixed expenses like mortgage payments or rent, car payments, and insurance.
Next list all of your variable expenses like entertainment, clothing, and groceries. The objective here is to make sure you can survive on the basics – food, shelter, transportation, health care and insurance. Here’s an example of how we develop our family budget.
Contacting Your Creditors
You need to contact your creditors immediately if you are having trouble paying your bills. If you are behind on your payments, most creditors will work with you on a debt management plan to help with credit repair and to put your account back in good standing.
Tell them why it’s difficult for you to pay your bills and work out a modified payment plan that reduces your monthly payments to a more manageable level. The worst mistake you can make is to avoid paying your bills and speaking to your creditors. They will send your delinquent account to a collection agency, and then there is no hope of repairing that relationship.
Create a Credit Repayment Plan
If you are struggling with credit card debt, student loans, or other bills you need to create a plan to ensure that at least your minimum payments are met. From there you can tackle your debt a few different ways:
- Highest interest rate first – using this strategy you would take your loan with the highest interest rate and direct all of your available funds towards paying this off as quickly as possible while maintaining just the minimum monthly payments on your other loans. After you pay off this loan, rinse and repeat with your next highest interest rate loan until you have paid off all of your debt.
- Lowest balance first – this strategy suggests you should direct all of your available funds towards paying off your loan with the lowest balance. This has a positive psychological effect since you will reduce your total number of loans more quickly than just paying the highest balance or interest rate first. Again, just rinse and repeat until all of your loans are paid off.
Consolidate Your Debt
Sometimes it can make sense to consolidate your debt into one loan at a lower interest rate to make your monthly payments more manageable. If you have some equity in your home or access to a line of credit at a lower rate than your credit cards and other debts than you should look into consolidating your debt.
Just be cautious, especially with a home equity loan, as now you are securing more debt to your house and you do not want to default on these payments and lose your home. And remember that even if you consolidate your loans into one, you still need a disciplined approach to repay it, otherwise you could find yourself in the same situation again down the road.
Repair Your Credit
Understanding how to repair your credit and how to fix it before it’s too late is not an impossible task. Create a realistic budget, talk to your creditors, and create a plan to eliminate your debt on your own, or with a consolidation loan.
True, it can seem overwhelming at first, but if you stay disciplined and stick with your plan you can take control of your financial situation without fear of snowballing debt and angry bill collectors.
It seems to me that I’m doing more and more for myself without the benefit of any reduction in price, and sometimes I’m even paying extra.
Let me give some examples from the service industry:
- Recently, when shopping in certain stores, I’ve had a hard time finding any sales associates to help me find what I’m looking for. There is just no one to be found. I think I missed the memo that advised me that these stores are now self-serve. On top of that, they want me to use their own store credit card to pay for my purchases so they can make even more money off me with their high interest rates.
- I pay an annual fee for shopping at Costco and then take their garbage (boxes) away for them. When grocery shopping at Superstore, I have to buy my own bags and then have the privilege of bagging my own groceries. And now I can scan them through the checkout myself. I actually don’t mind the self-checkout but I’m embarrassed to admit that I talk back to the snippy automated cash register.
ACR: “Place the item in the bag.”
Me: “I’ve already put it in the bag!”
ACR: “Place the item in the bag.”
- I have rarely set foot in my bank branch for years. I do all of my banking online and even view all my account statements online and they still charge $9 a month on my chequing account.
- In fact, all the companies that allow you to pay bills online via e-post should give us some kind of discount. After all, we’re saving them thousands of dollars on paper, ink, envelopes and postage.
- I fly with WestJet to visit my parents in Kelowna. Their fares have tripled since they first came along with their “no frills – cheap fares” airline. I now book my flight online and print my own boarding pass. If I want to choose a seat I can pay an extra $3 – $15 for that privilege. At the airport I can tag my own luggage before dropping it off. What’s next? Will I have to run it down the tarmac to the plane and pay extra to have it stowed securely in the baggage compartment? On my last flight I received a half a glass of water for my refreshment!
When everything is done online or becomes self-serve will my only contact with an actual person be on the phone to a call centre that’s not even in my own city?
And why do I have to pay extra to speak to an agent? Sometimes I have a problem or need clarification. This used to be basic customer service – someone to help you. They just don’t get it.
Having worked in the hospitality industry for ten years, I learned many different techniques to try and make more money for our restaurants. By understanding the many ways restaurants can manipulate you to spend more money on your dining experience, hopefully you can keep more of your hard earned money in your wallet and out of the greedy restauranteurs’ hands. Here are a few ways that restaurants make more money from your visit.
The Menu
This is the number one source for sales at any restaurant, and countless hours are spent trying to make every item listed as profitable as possible. Typically each menu item is priced according to its cost. Restaurants want to attain a food cost percentage below 30 percent (ideally below 25 percent). However you won’t just see oddball pricing of $9.32 simply because it fits a formula. Customers do not perceive a difference between $9.32 and $9.99. By applying this pricing technique to dozens of menu items, this is an easy way for restaurants to gain a couple of points on their margins.
Restaurants also use boxing or shadowing techniques to highlight items, which typically increase the sales of that item by 20 – 30 percent. Also just using the words special or new tend to increase orders by up to 20 percent. So why would restaurants want to highlight these specific items? While sometimes it is the most popular item on the menu, most often these items have the lowest food cost or highest profit margins for the business, meaning not the best value for you.
The Upsell
In the hospitality industry, more focus is placed on training their people to become great sellers. The waiter, hostess, and bartender are just extensions of their sales staff. Upselling has become the industry standard, as side dishes, appetizers, desserts and drinks all help build higher average cheques.
Recommending that you pair complementary items together is another way to get more money out of your wallet. How often have you had a server ask you if you wanted to add mushrooms or prawns to your steak, or a specialty coffee with your dessert? Have you ever been offered bottled water or Perrier when you ask for water, or have been offered a bottle of wine or half-litre instead of the two glasses you asked for? A good server will take every opportunity to upsell an item to you.
The Buffet
Since buffets do not make a lot of money without consistently getting a high volume of people through the doors, this is probably your best value for money spent. Still, good restaurants find ways to make money even on buffets. First, they will make sure you have a glass of water. They will set out smaller plates than normal at the buffet line to play on some people’s fears of going back to eat multiple times. And they will start with a spread of low cost breads and salads to fill you up. Also, take a look at the entrée’s, as these could have been last night’s special that didn’t sell.
Another fun fact, check out the straw that the restaurant uses for your drinks. The non-stop refill pop that you ordered will have the skinniest straw possible to help slow you down, while the alcoholic beverage you ordered will come with a big fat straw to speed up your consumption.
By understanding the various techniques restaurants use to make money from you, hopefully you can avoid some of the manipulation and subtle mind tricks designed by this industry to squeeze an extra few bucks out of your wallet.