Too Thrifty Chicks

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Sudden Loss: Are You Prepared?

Submitted by a Too Thrifty Chicks reader committed to Operation Do Better

What would you do if your current financial snapshot was suddenly frozen in place? What if you would never make any more than you already make? In fact, what if your income was to temporarily disappear and reappear only after the passage of time, and then only in greatly reduced quantity? Do you have a plan for how you would pay the mortgage or rent? Your credit cards? Is that emergency fund in place?

You leave for work one morning, and the whoosh you make as you pass by yesterday’s stack of mail actually blows one of the bills to the floor. Still, your momentum can’t be broken because you have things to do that day. “I’ll take care of this when I get home,” you reasonably think to yourself. Later, I would say “handle it right then” is the first lesson I learned on the day when I would fall at lunch, shatter a leg, and be wheelchair-bound for two months.

My doctor remarked on the number of times I’d fallen in less than a year and ordered an MRI of my brain after surgery to set the leg. Good risk management, I thought. Later I would view the scan with the heads of neurology departments of two major hospitals. Even I could see the neurological abnormality. Was I born with it, only to have it manifest in my last decade in the workplace? Or had I merely fallen one too many times? Only extensive testing could determine the age of the injury, and I had no time for exploration. I had to get healthy because I had a job to do. Or so I thought. Seven months later, I would lose that job shortly before turning 60 and, yes, a few months before vesting in the company’s defined benefit pension.

Let’s shelve the panic and gloom of losing your job just as you turn 60. Or 50, or any age. This calls for swift action What happened to me could happen to anyone if you view the hypothetical situation broadly. Regardless of how you get there, you may face a sudden (read: unplanned) absence from your job. Accidents happen. Illnesses happen. Yes, even to working people who think that their steady income is forever. My advice is to reform your thinking and spending now. Prepare now. Following are some bits of advice that I learned both the hard way–all by myself–and the easy way from the Too Thrifty Chicks:

1. Cut out all extraneous spending. Now. This includes, but is not limited to, cable TV, a landline phone at home, and wine with dinner. Learn to watch your favorite shows online. For example, it is no tragedy to watch ‘The Good Wife’ online on Monday, a few hours after the latest episode airs on Sunday. Eliminating TV service requires you to be intentional in what you watch. During football season, I hang out with friends on game day and watch NCAA football on their TVs. No landline means no robo calls or edgy charitable solicitations. No wine with dinner means you’ll lose weight without changing anything else in your life. Depending on your cable package and taste in wine–in one month’s time–you can re-capture up to two hundred dollars that you were spending unnecessarily. Put at least part of these funds in advancing step #2.

2. Build your $1,000 Emergency Fund now. Sell what you aren’t using or don’t love to fund it. Try pet sitting, dog walking, or babysitting. Brainstorm with your online community. I didn’t have an adequate Emergency Fund. When the inevitable happened–repair work on a car, a pet’s illness, new medical needs–at first I would use a credit card, vowing to pay off the expense the next month…and then another inevitable event would occur. You get the picture. Are you still working? Great. Do it now. I have come to view the Fund as the most important step, regardless of your income.

3. Consider renting space in your home, short-term. I took a deep breath and just did it. What I found was a delightful and steady stream of med school students, interns, and residents who needed housing short-term,( ex: six weeks at a time). I find medical professionals to be ideal tenants because you have a modicum of leverage over their behavior by virtue of having contacts in the admissions office. Medical school is all about advancing through the ranks by doing everything right. Your contacts with people in the medical school means you can retain a measure of control over your tenants’ behavior. So pay a visit to the admissions office for medical school, generally, and to the departments of medical specialties, where you will find out-of-state students who need a place to stay during their 6-week rotations. Yes, this requires a certain amount of bravado. Here, the risk is worth the rewards. Depending on where you live, this could create several hundred dollars per month.

4. Stop shopping. Undertake a spiritual journey towards a path of living in the moment. Try not to want anything. When you realize that you have enough to eat, adequate shelter, and clothing, you begin to realize how lucky you are to have your most basic needs met.

5. Re-define your needs vs. wants, and do so honestly. Realize you have resources to get what you need but don’t yet have. There will be another job. Really.

The author of this post wanted to remain anonymous, and we respect her wishes. We are so appreciative of her sharing her story and hope it inspires you to simplify your living, set up more savings, and be prepared for anything that might come your way.

Until Next Time,

R&R


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Tidbit Tuesday: Cynthia D. Talks Student Loan Rehabilitation

Guest Contributor: Cynthia Dorrough

As an impressionable 20-something, I didn’t heed the small print on the promissory note or the spiel in the loan exit interview that is required by the Department of Education (DOE). I made the gross assumption of thinking “I’ll deal with these loans when I deal with them.” They stopped calling and sending letters to the house, so everything was alright…right?? As Charlie Murphy would say, WRONG!! WRONG! I defaulted on my loans.485982_10151439416772774_2100952392_n

When you default on your student loans, each semester’s loan is broken out on your credit report. So, 8 semesters of school equaled 8 negative trade lines. In addition, the government adds a 20% collection fee to your student loan balance when you default. A daunting situation.

I pretty much lost all faith in having some form of a decent life and figured that even though there is no such thing as a debtor’s prison, my poor credit score had me in shackles. But I decided not to wallow. I put on my big girl panties and contacted the DOE. A nice representative named Eric pulled up my account, and I asked him about the loan rehabilitation program. Here are the steps I took and some advice for anyone who is in the same situation:

  1. Be Proactive: Contact the Department of Education (don’t be afraid, they won’t bite) and they will transfer you to their collection agency. The Department of Education outsources their collections to a 3rd party collection agency, so you may not deal directly with DOE.
  2. Be Specific: Tell them you are interested in rehabilitating your student loan and you are looking for “reasonable and affordable” monthly payment. Please remember to use those two words. For some reason those words are magic. The Student Loan Rehabilitation Program allows you to make a minimum of nine (9) consecutive, on-time payments to bring your loan back to current status. They will come up with an amount based upon the amount you owe. Typically, your payment will be around 1% of your loan balance or it will at least cover the monthly interest amount associated with your loan.
  3. Set Up Payments: Once you receive your schedule and amount to pay, you can either do automatic debit or call in and make the payment. Please keep in mind, you will not receive paperwork when you enter the loan rehabilitation program because of the promissory note. However terms of the rehabilitation are outlined in the Higher Education Act. I wouldn’t give a collection agency my primary bank account information. I had a separate account at a different bank that I used for my student loan rehabilitation or you may be able to use one of those reloadable credit/debit cards or an Internet Banking account and they would draft the money from the account. Note: A word to the wise, as stated above, the Student Loan rehabilitation program consists of you making nine consecutive on-time payments and they will send you a letter in the mail informing you that your loans are in current status after the 9th payment has posted. That is one of the only times you will receive something in the mail addressing your loan rehabilitation. Wait until you receive your letter before you decide to be late or think that because you made 9 payments, you are through.
  4. Follow Up: Stay on them and I would call and check in periodically to make sure we were on the same page, especially when you are approaching that ninth payment.

Remember that nasty 20% collection fee that I mentioned that the DOE tacks on when you default? It goes away when you rehabilitate your student loans! Whoo Hoo!  Another good thing is the trade line will still have the original date in which you took out the loan which means that debt is seasoned, giving you a longer credit history. I usually tell people to rehab your loans first if you are in default rather than consolidate because they will consolidate that extra 20% collection fee into your loans, which you don’t want to do. It may be a sacrifice for those 9-10 months, but your principal will be lower.

That is my story on my road to redemption. One lesson I learned is things will get a lot worse before they get better when you ignore things. The Department of Education is not trying to shame you or place you in the gallows.  They will work with you as long as you are proactive.