No matter how carefully you manage your finances, you’re bound to make some mistakes — and maybe some big ones at that. Remain calm…and whatever you do don’t let one mistake cause your entire financial picture to spiral out of control. With some sweat equity and a few slices of humble pie you can bounce back! Here’s how:
Mistake: You missed a credit card payment.
Solution: A recent report straight from the FICO people said that a 30-day late payment would reduce a FICO score of 680 by 60 to 80 points; the same 30-day late payment would reduce a FICO score of 780 by 90 to 110 points. Wait, what’s your FICO score?? It’s a major part of the credit score that lenders use to assess whether or not to give you a loan. In the case of the above late-payment scenarios: ouch. So where do you start? Suck it up, pick up the phone, and call your credit card company. Explain to them that this is a one-time mistake, and, if possible, tell them what happened (did you forget to tell them that you moved, and the bill went to the wrong address? Did you recently lose your job?) Make sure to get across that you are a loyal customer and plan to use them in the future. You’d be surprised how far a little humble pie can go: you might keep them from reporting your late payment to a credit agency, and they might also help in removing any fees or other changes that might have been placed on your account.
Mistake: You splurged.
Solution: There’s nothing wrong with a little treat now and then — even a big treat, in the event of a bonus or major promotion at work — but keep it up and those treats can add up to a costly shopping habit. It might sound like an oxymoron, but give yourself a “splurge budget”: allow yourself 5% of your paycheck to spend on whatever you want, no questions asked. A little built-in treat will keep you on track while ensuring that the majority of your paycheck goes where it ought to: to living expenses and savings. Already done some damage and can’t return it? Wait for the same item to go on sale, and then see if the store will allow you to “repurchase” it for the sale price.
Mistake: You bombed your credit score.
Solution: It’s a common problem, especially with the younger generation: it’s not so much that you intentionally sabotaged your credit score, as you simply neglected to keep track of it. The good news is that you can recover, but that starts with giving your credit score a little love. It might sound counterintuitive, but now is the time to get a credit card if you don’t already have one. Apply regular payments to this card — your utility bill, for example, or gym membership — to make sure that it remains active but doesn’t go over its limit (a good rule of thumb is to keep expenses to 30% or less of the card’s max). To get the most bang for your buck (er, plastic) look for a card that reports to all three credit bureaus.
Mistake: You used your student loans…for something other than textbooks.
Solution: Using some of that student loan money for a spring break trip to Costa Rica might have seemed like a good idea at the time, but you’re only hurting yourself in the long run. Remember that any student loan money you spend will have to be repaid with interest; so, that $1,500 trip to Costa Rica times 8.5% interest is actually going to cost $1,627.50. Already booked the trip? Try to pay down a little more next month to bring your accrued interest back under control. You want to be putting dents in the total amount you have to pay back — not in your wallet.
Mistake: You missed a health insurance premium payment.
Solution: Most health insurance companies offer a 15- to 30-day grace period for premium payments, so even if you missed the soft deadline listed on your bill there might still be time. Call your health insurance provider immediately and, if possible, pay over the phone to avoid any mail delays or late fees. Outside of the grace period? It’s time to beg. Unlike credit card companies, health insurance companies are pretty strict about cutting you off — i.e., cancelling your insurance — if you fail to pay inside the grace period, and they often have policies in place in which, once you’re kicked out, you can never apply for insurance with them again. Explain what happened and see if there is an option to appease them: by paying for the next two months in advance, for example, or accepting a higher premium. As painful as it is, even a higher premium is a small price to pay compared to the alternative: paying for services entirely out of pocket.