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Many times, your wants can feel like needs. Purchasing holiday gifts for your family,
throwing a birthday party, or purchasing a new outfit may feel like needs. A key to
financial stability is never to use credit cards to pay for your
wants
. Non-essential items
should be paid for with discretionary funds or savings. If you don’t have discretionary
income to pay for the items you want, get creative! Give handmade gifts,
scale back the party, or
purchase an accessory
to wear instead of
buying a whole new
outfit. Keep in mind
that nothing feels as
good as being debt free!
Consequences of Financial Irresponsibility
Being a responsible borrower is just as important as being a responsible student or a
responsible parent. It indicates to creditors that you pay your bills on time and you care
about your good credit. Sometimes bad things happen to good people, such as a major
emergency or a job layoff. If you can no longer afford to make your loan payments,
there are right ways and wrong ways to handle the situation.
Increase your income – Take a part-time job or sell some of your non-essential
items on eBay.
Ask for help – Everybody needs a helping hand now and then. Ask friends or family
to borrow some money. This is preferable over obtaining a high interest-bearing
loan. Many cities have emergency funds for families in crisis to pay for housing or
utilities. Obtaining assistance for those items may enable you to continue to pay
your other debt obligations until your situation stabilizes.
Communicate with creditors – Don’t ignore the calls from creditors, as this will
cause them to racket up the pressure to collect the debt. Instead, reach out to
them. Explain your situation. Creditors will usually work with you to reduce your
monthly payments temporarily.
Special considerations for student loans
Unlike other debts that can be discharged through bankruptcy, federal student loans
cannot. The consequences for defaulting on a student loan are severe. The Department
of Education can garnish your tax refund without any type of court order. If you filed your
taxes with a spouse, their portion of the refund will also be garnished, and put toward
your defaulted student loan.
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Section 8 – Responsible Borrowing and Budgeting