So close to tax day, we’ve all had a chance to take stock of our income and debts and examine our financial situation in a faltering economy. This year more than most there is cause for concern. Inflation is almost certainly worse than the official numbers suggest (and the official numbers are pretty bad). The supply chain remains broken and car prices are exorbitant. We are in a double crisis of rents and housing, and gas prices continue to soar. The drums of war are beating louder and louder as the Russian invasion of Ukraine enters its second month. If we’re at a breaking point, you have to ask yourself how resilient your finances are. For permit holders, a sudden downturn can mean more than a bad year. Unpaid bills can kill a breadwinner.
“During security clearance background checks, debt is looked at for a variety of reasons,” says Ashley Morgan, a debt and bankruptcy attorney in Northern Virginia. She explains that referees want to know if you are living beyond your means. “If someone has debt that they use to supplement their income for extravagant purchases, that creates a higher risk situation.” If the debt is large enough, a secrets keeper is more likely to be compromised. Moreover, addiction and debt often go hand in hand.
“Financial considerations” are by far the main reason why the Ministry of Defense refuses or revokes a clearance.
To eliminate debt, you must be in control of all of your financial affairs. The first step in any personal financial recovery is to create a spreadsheet of every debt you have, the balance, interest rate, due date, and payments due. While you’re at it, you can also add the customer support line for each card. Credit card rewards programs are very enticing and applying is easier than ever. This means you might have more credit cards than you think, many of which have annual fees.
It would be foolish to rely solely on email reminders for your payment due dates. Spam filters, after all, can sometimes be overzealous. Once you’ve created your spreadsheet, add each due date to your calendar, set them to repeat every month. One rule you can apply: Your calendar is sacred space. The only things you should ever add are things that will happen for sure. This meeting at 3:00 p.m. Thursday. Your child’s volleyball match on Saturday noon. And your bills. Nothing in this world is more certain than a credit card company noticing that you are a day late on a payment.
There is no excuse for accidentally incurring late fees. Do you really want to give to a bank After money? They’re already charging you 17% interest on the coffee you bought at Starbucks last year. If you are heavily in debt, on the day a bill is due, you must have more money in the bank than the minimum payment. Also, each month the amount you owe must be less than the previous month. This basically means looking at your credit card statements, figuring out exactly where your money is going, and cutting those expenses where possible. The Total Money Makeoverby Dave Ramsey, is an excellent book designed to help you do just that.
PAY OFF THE DEBT
Kristina Guardado, financial coach and founder of Elite Empowerment Coaching, explains that when it comes to eliminating debt, a one-size-fits-all approach doesn’t necessarily work. “Some people are motivated and will make a lot of sacrifices to get rid of their debt as quickly as possible. Others may need motivation and enjoy quick wins. There is a debt repayment strategy for everyone.
It offers four methods to pay off the debt.
The snowball method is to pay off one debt with the lowest balance first while making minimum payments on everything else. “Once the first lowest balance is paid, you roll that payment into your next lowest balance,” she says. “It can be good for someone who needs motivation. You get quick wins and boost motivation to keep going! »
The Avalanche method means first paying off your debt with the highest interest rate while making minimum payments on everything else. Pay off the balance at the highest interest rate and incorporate that payment into your next balance at the highest interest rate. She says this method is good for those with high-interest credit cards or a payday loan. The goal is to save money otherwise spent on interest.
The highest monthly payment method is to pay off your highest monthly debt payment first while making minimum payments on everything else. Pay off the bill with the highest monthly debt and roll that payment into your next highest monthly debt payment. “This can work well for someone who is cash tight as they struggle to get rid of their highest payout. This finally frees up that money to start using it for other purposes.
The “Debty Downer” method means paying off any debt you have that makes you angry every time you see it. You pay that first while making minimum payments on everything else. Then re-evaluate those strategies again and find the next best one to pay. “It can work well for someone who is in debt from a divorce, medical surgery, or any other debt that brings up bad feelings. Paying it back allows them to put this behind them and move on with their lives,” she says.
GET LOWER INTEREST RATES ON DEBT
Sometimes the high interest rates and the amount of debt can be overwhelming. As we learned last month, gasoline prices sometimes double overnight. Sometimes $100 spent on groceries only buys $85 worth of food. Todd Christensen, an AFCPE-accredited financial advisor and author of Everyday Money for Everyday People, says that if debt starts to overwhelm you, contact your lender or credit card company and try to negotiate a better interest rate. This will allow more of your monthly payment to go toward the balance owing. You can also contact a non-profit credit counseling agency.
“Each credit card statement contains such a recommendation for consumers having problems with their debts,” he says. “Credit counseling agencies work with your current creditors to lower their interest rates and get you out of debt in five years or less. Because they work out new agreements with your creditors, you don’t suffer the negative effects of other tougher options.
Beware of for-profit debt settlement companies. “They suggest they can get you out of 50% of your debt. Unfortunately, the process also leads to an even worse credit score, further jeopardizing security clearances,” he says. They can also charge exorbitant fees, which compounds your problems.
Debt consolidation loans and balance transfer offers can also be dangerous, as they are not debt elimination strategies. Rather, they are reshuffling of debts. “Too many consumers take out such loans and lines of credit to pay off their credit cards only to find that they haven’t addressed the reasons they got into debt in the first place. Many continue to overspend and find that they reduced their original credit cards to their limits within a year or two, doubling their debt and financial problems,” says Christensen.
No matter what you do, do Something. “Doing nothing is not an option,” says Christensen. “The creditors have not forgotten the debts you owe them. Many wait until a month or two before the statute of limitations expires to seek judgment against you in court, with which they can seek to garnish your wages. If you end up in court, you will need an experienced lawyer.
BANKRUPTCY IS AN OPTION
Bankruptcy should be your option of last resort, but it is an option, especially if you have insurmountable debt. “It’s better than missing payments and being delinquent,” says Ashley Morgan, who adds that she’s brought clients into her law firm specifically because of concerns raised during early investigations. security clearance. “Often, we file for bankruptcy — both in Chapter 7 and Chapter 13 — to help individuals deal with their debts and obtain or maintain their security clearances. Bankruptcy is often considered better than having an unpaid debt that you cannot pay.
A Chapter 7 bankruptcy usually takes three to four months. “It eliminates a lot of debt and gives someone a quick fresh start,” she explains. Alternatively, a court may offer a Chapter 13 bankruptcy, which is generally a three to five year payment plan. “It helps to consolidate someone’s debts into one payment and settle them in a reasonable way. Once the payment plan is in place, investigators often confirm that payments are made on time. »
Debt can be terrifying when money is tight, and money is getting tighter than ever. Take stock of your debts, watch your spending, reduce your interest rates when possible, and establish a repayment plan. Getting your financial affairs in order is perhaps the most important thing you can do right now to preserve your security clearance and weather the economic challenges ahead.