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How to plan ahead for debt
By Adam | October 25, 2006
Plan ahead for debt
Q. How should I prepare for life-changing events?
A: The only real question is how prepared we will be for them.
That’s why having a plan is so important.
Knowing what to do before a marriage.
That means coming clean with your soon-to-be spouse about your financial condition.
Knowing if your partner is ahead or behind in the finance department is as important as knowing if he or she is healthy.
You don’t need to know to the penny, but it is only reasonable to expect to know what you are signing up for.
Sharing credit reports is one way to be sure that no one says “Aye-yi-yi” after “I do.”
Knowing what to do to prepare for a divorce.
It’s never fun or easy to prepare for a divorce.
After informing your ex-to-be, you should close your joint accounts as soon as possible and establish separate accounts and credit.
Ask that joint accounts be closed to any new activity.
Agree about who will pay which bills, and transfer whatever obligations you can to credit cards or loans in your own names.
In community-property states, you will want to transfer the debts into the new accounts after the marriage is dissolved.
This falls into the category of “emergency savings cushion.”
This is the No. 1 way to be prepared for those rainy days.
Three to six months of living expenses should be sufficient to allow you to successfully bridge to a new job without financial injury.
Knowing how to create a realistic budget.
It begins with adding up income and expenses.
To be financially successful, your income must be more than your expenses.
If it is not, a second job, overtime or selling something is probably in your future.
Once you get to retirement, expenses might exceed income, but anticipate how long savings will last and plan what you will do if they run out.
The biggest advantage to planned spending is the fact that you have prepared for the expense, either through savings or by cutting back in other areas.
Once you have done this for a while, it will become second nature.
Knowing how a new expense will affect your bottom line will enable you to make the best decision for your financial, mental and sometimes physical well-being.
Getting better interest rates when you borrow.
To get better interest rates when you borrow, you will need to be sure your credit reports are in good shape.
The best way to do that is to pay every debt you owe on time, every time.
“Debts do not improve with age” is one of the Debt Adviser’s favorite mantras.
-Adam
| DEBT ADVISOR Columbia Daily Tribune, MO - … rates when you borrow, you will need to be sure your credit reports are … International Financial Education Foundation and the author of “Credit Repair Kit for … |
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Topics: Personal Finance |