Beating Broke

Personal Finance from the Broke Perspective

Building Financial Sanity From The Ground Up

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There’s a term that describes the state where you can make decisions from a position of strength instead of one of weakness, and from a position of powerful confidence instead of a position of fear. This term is known as financial sanity, and it’s one of the most sought-after things for so many people who aren’t currently possessed of it. The trick is, a lot of the time, financial sanity isn’t something that can be possessed, the way one can own the contents of their bank accounts.

Financial sanity is an entire mindset, and it’s one where you’re able to make assessments over the long term instead of simply doing things for today and this instant. When you can make plans that will stick over the long term, you can get far ahead not only of your competition, but of your previous self. While it might not seem that important to defeat who you used to be, this is a vital part of getting ahead in any endeavor in life.

Building Financial Sanity From Madness

For a lot of young people, and even for professionally trained ones who can handle all kinds of problems in the academic world, there are a lot of real-world problems that can be downright intimidating to go through. When parents get sick, when a car accident leaves you with an injury and no car, or when the job market for your set of skills just isn’t what you signed up for, it can become terrifying, as well as disheartening. It might even be tempting to just dive into a bottle.

It’s crucial to fight the self-destructive impulses that will inevitably crop up. In the end, deluding yourself into believing you don’t have problems is one of the biggest issues you can find yourself getting into. The best way to overcome problems is to become a great problem solver, and this starts with thinking critically and avoiding panic.

Critical Thought

The big secret of critical thought is to evaluate why things happen the way they do. When you can think about why a situation is as it is, you can begin to understand it. You’ll find that as your understanding grows, your level of anger and fear diminish, and you feel a lot more at peace. When you’re at peace, you can think clearly about what you want to do, given the variables that are at play.

When you engage with the Student Loan Hero program, for example, you have the option to take charge of your student loans in a practical, pragmatic fashion that allows you to make longer-term decisions. This month’s payment is almost irrelevant. The real issue is, how will repaying your student loans be doable over the long term, while you’re able to accomplish your future goals as they come up? You can do just about anything you can put your mind to in a calm, clear-headed fashion.

Image source: Pixabay.com

Debunking Myths about Filing for Personal Bankruptcy

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If you’re thinking about filing for personal bankruptcy (either chapter 7 or 11), then the most dangerous adversary you face at this time isn’t an army of aggressive creditors: it’s a horde of devastating myths!

Indeed, there is arguably more misinformation floating around online and offline about bankruptcy than there is reliable information. That’s the bad news. The good news is that you can arm yourself with facts so that you can make informed decisions that are best for your current and long-term financial interests.

To that end, let us debunk the most enduring — and potentially catastrophic — myths about filing bankruptcy:

Myth: Filing for bankruptcy is an admission of financial irresponsibility or incompetence.

Fact: Across the U.S., more than 1.5 million individuals file for bankruptcy protection each year. The vast majority of these people aren’t thrill-seeking spendthrifts. They’re regular, ordinary people who fell into a debt hole that became a debt trap. For some, it happened slowly over time. For others, they were financially sideswiped by unexpected medical bills, home repairs, job loss, divorce, and the list goes on.

The message here is simple: if you decide to file for bankruptcy, then be assured that it’s nothing to be embarrassed about or ashamed of. Unsustainable debt happens. Filing for bankruptcy is a legal process designed to help people get out of debt and start fresh. It’s a protection, not a punishment.

Myth: Filing for bankruptcy will destroy your ability to get a loan in the future.

Fact: Yes, it’s true that filing for bankruptcy will damage your credit score (the actual number depends on where your credit score is right now — the higher your current score, the larger the drop).

However, it’s not true that filing for bankruptcy will permanently destroy your ability to get a loan in the future. Within months of filing for bankruptcy you can start rebuilding your credit score by applying for secured credit cards, and paying all of your other bills on time and in full. Within a year you’ll be eligible for a car loan or personal loan (you could actually get a car/personal loan sooner, but the rates will be sky high), and in a couple of years you’ll qualify for a competitive-rate mortgage.

Ironically, many people who file for bankruptcy end up surpassing their old credit score ceiling, because in their new post-bankruptcy life they are in control of their saving and spending, and are far more aware of the dangers of only paying the minimum amount on credit cards, buying “too much car” or “too much house,” and so on. They’re like people who, after getting a serious health scare, end up taking their health and wellness to unprecedented levels. They go from couch potato to marathon runner.

Myth: To save money, you should represent yourself in bankruptcy court.

Fact: If you have a legal background — and this doesn’t mean a few law classes in college or a neighbor who was once a paralegal — then you might be fine representing yourself in bankruptcy court.

However, if you’re like most people — i.e. you couldn’t write a book on how to correctly and safely file for bankruptcy — then do yourself an immense favor and consult a bankruptcy lawyer. You’ll not only avoid potentially costly mistakes, but you’ll save a great deal of time and stress. Why stress? Because once you file for bankruptcy, you want to ensure that everyone else around the table — from the court-appointed trustee, to all of the creditors who want a piece of the settlement pie, and even to the judge who is a human being and can make errors — behave in a legally compliant and appropriate way. A bankruptcy attorney ensures this happens.

The Bottom Line

Arming yourself with bankruptcy facts — and debunking myths — will help you make an informed decision on whether moving ahead in this direction is in your best financial interest.

If so, will it be a walk in the park? No. But it won’t be a trek through a minefield, either. With the right information, guidance and support, you’ll make it through this phase and into your new, better financial life ahead.

5 Strategies to Buy a Used Car without Being Scammed

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Besides your home, one of the biggest expenses you will face is purchasing a car.  Unlike a home, cars do not appreciate.  They are a depreciating asset that lasts for a finite period.  Choosing the correct type of car within the price range you can afford can have long lasting consequences on your finances over the years.

John (name changed) is a 21 year old college student.  He was in the market for a new-to-him car, but he knew he didn’t want a car loan.

He found the perfect deal on Craigslist.  The car was listed for $9,000, but John knew that it had a Kelley Blue Book value of $12,000.  John met the owner, went for a test drive, and paid $9,000 in cash.  John was proud of his deal—until he went to transfer the title and learned the great deal he had just bought was a stolen vehicle.

Now, John, the smart student who didn’t want to go in debt for a vehicle, is out $9,000.

Everyone knows that dealer prices for used cars are usually at Blue Book value or higher, but the up side is that if you buy from a dealer, you don’t have to worry that the vehicle is stolen.

But what should you do if you want to find a good deal and don’t want to rely on a dealership?

Used Car Scammed
Original Photo via John Lloyd on Flickr

The investigator on John’s case recommended taking these precautions:

Try to buy used vehicles from family or friends.  The best thing you can do is buy a used car from family or friends who are upgrading their vehicles.  You know that the vehicle isn’t stolen, and you also have a good idea how well the vehicle was maintained.

Be wary of a good deal that is significantly below Blue Book value.  If a seller wants to sell a car for much less than it’s worth, be suspicious.  In this case, you should think of the old adage, if something seems too good to be true, it probably is.

Don’t trust a seller who only has his cell phone number as his means of contact.  If the seller won’t give you any personal details or ways to contact him besides his cell phone, he may have something to hide.

Run a CARFAX check.  Running a CARFAX is a good idea no matter where you’re buying the vehicle.  A CARFAX will tell you how many owners have had the car, whether it’s been in an accident, how it was maintained, among other information.

Run a VIN check.  Using the free service VINCheck, you can see whether or not the vehicle you’re considering buying has been stolen.  Had John done this, he would have been tipped off immediately that something was not right with the vehicle he wanted to buy.  As it turns out, his vehicle had been shipped down to Mexico where the VIN was altered.  The vehicle was then brought back to the U.S.  When John went to register the title, he discovered that the VIN he had did not exist.

Buying a car from a private party can be worthwhile and save you money if you take the proper steps.  If you don’t, you could find that the bargain you purchased was actually a very expensive lesson.

Have you ever had trouble buying a vehicle from a private party or know someone who had trouble doing so?