‘œChance favors the prepared mind.’ ‘“ Louis Pasteur

Climbing out of the dual financial pits of foreclosure and bankruptcy wasn’t just a matter of luck.   Getting out of the pit required a combination of better decision making and planning.   Making better decisions about relationships, my business and real estate helped, but those decisions didn’t stand alone in a vacuum.   Even after my mobile home had foreclosed and my debts were discharged in bankruptcy, disaster still had a way of finding me.

Digging out wasn’t just about making better financial decisions.   It was also about planning for the future and the possibility of future disaster.   It didn’t happen quickly, and it was neither flashy nor sexy.   Mostly, it consisted of small, incremental.   It was boring, and it took time.

In the 11 years since my bankruptcy was discharged, I’ve made a number of changes that have made a   difference:

1.       I put money in my savings account every month.   Even during the lean times I put a little something into my rainy day account.   I see this as the cushion that separates me from disaster, and the higher the balance the better off I am.   This cushion prevents me from having to carry a balance on my credit card, or worse, borrowing money from my retirement account.

2.       I contribute money to my retirement fund every month.   Since my bankruptcy, this has been a high priority.   During the flush times, I contribute more and during the lean times I’ve contributed less, but I’ve made it a high priority to always contribute something.   When I was employed, I contributed to my 401(k) plan at work.   Since I’ve been self-employed, I set up a SEP-IRA.

3.       I use credit cards like debit cards.   I have a personal bias against debit cards, especially when shopping online, because it’s too easy for money to disappear from my checking account in an uncontrolled fashion.   Instead, I use a credit card, but whenever I made a purchase, I immediately write a check to the credit card company.   I make every effort not to carry a balance because I see interest payments as a waste of money.   That hasn’t meant I’ve never carried a balance since my financial implosion (I have) but I’ve made it a priority to get the cards paid off and keep them paid off.

4.       I pay special attention to the difference between wants and needs.   It’s easy to justify a new purchase as a ‘œneed’ when it’s really a ‘œwant.’   I’ve learned to take a good hard look at purchases and services and categorize them appropriately.   Things that fall into the category of ‘œwants’ are the first thing eliminated when times get tough.

5.       I consider all debt, even so-called ‘œgood’ debt, as undesirable.   Even when borrowing money is for a good cause, such as a home or education, it still raises the cost of the item.   For large-ticket items, such as homes, cars and education, it can add thousands of dollars to the original purchase price.   This doesn’t mean that I haven’t incurred any debt, but it’s made me realize the full cost of borrowing.   I regard all debts as undesirable, and do my best to accelerate the payoff schedule whenever possible.

Although these changes have certainly made a positive difference in my life, they haven’t been a complete protection against financial disasters.   I’ve still had cars that developed sudden and serious mechanical problems, clients who didn’t pay, and appliances that decided to spontaneously implode.   Having a cushion has evened out some of the bumps in the road, but it hasn’t completely eliminated them.

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