March 24th, 2011

Is Fixing Financial Problems Necessary?

Financial Problems?

To answer this question upfront, yes and no. Fixing financial problems is absolutely necessary to the health of your financial life, but only if you take it very seriously. For those of you who don’t care about your credit rating for whatever reason, fixing your financial problems probably isn’t in your top 10 list of things to do.

Let me explain. If you plan to buy a house, a car, or do anything that involves a good, clean credit score, yes you should definitely fix your financial problems.  Because of the economy, some companies are requiring people to have excellent credit ratings.  In fact, you practically have to jump through hoops to get approved for any type of loan or credit line.

Is Bankruptcy a Good Path for You?

On the other hand, some people have found themselves in situations where giving up on their financial problems is probably better than fixing them.  Take, for example, someone who has insurmountable debt that can only be paid off through a bankruptcy.

While it’s true that bankruptcy will wipe your credit score clean, it’s also a nod to creditors that you may be a potential risk.  They’ll see someone who borrowed money and couldn’t pay it back.  This is also true for people who failed to pay credit card bills or medical bills for whatever reason.

Can I Just Ignore the Financial Problems?

In some cases, it is best if you simply ignore your financial problems.  Your credit score resets every 10 years, so if you have debts that stretch back that far, there is no point in attempting to pay them off now.  If you do, you will cause the clock to reset.  Just let them drop off, one at a time.

In the meantime, you have to make the appropriate sacrifices.  It sounds ludicrous but living off cash isn’t that bad.  It teaches you good spending habits, and self-control.  If you can’t afford it, you either won’t get it, or you’ll save up to buy it.  This is a habit that anyone with any credit score can benefit from once it’s implemented.

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