I’ve had the best winter I’ve ever had as a real estate agent. Money in reserves the whole way through. But sometimes both as a self-employed real estate agent and as a real estate investor there have been months that were longer than the money I had on hand.
And for most people this will happen at least once in their careers. But what to do if it happens to you?
Don’t Panic – Curtail Spending
As you know, your credit score is vitally important to your economic health. Protect it at all costs by making sure all bills are paid on time. If you know you are going to fall short (and 99% of the time you will) you can begin to make spending adjustments right away. Peanut butter and jelly sandwiches instead of Wendy’s. One more year with an older car and no car payment.
Build Savings When Times Are Good
We’ve heard it a million times. Have 3-6 months of reserves. For many people, that may never actually happen. Or they may not think it will happen. I like what Dave Ramsey says on the issue. “Get $1,000 in savings as quickly as possible.” A lot of unexpected surprises can be dealt with when you have an extra $1,000.
Take The Extra 29 Days
As we all know you have to make your payments on time to keep from getting a late hit on your credit report. Do you know what “on time” actually means? Your creditors will not report you late until you are 30 days past your payment date. Therefore, you can make your March 1, 2008 house payment on March 29, 2008 and still be reported as paying “on time”. That extra time will allow you to get the money together, most of the time.
But remember, once you go down this path you are essentially going to have to make two payments in April to make up for the one you “skipped” in March. Do not use this technique to go on a trip or to buy a new car. This is for emergency purposes only!
Now the creditor’s bill collectors will tell you otherwise. They will call and threaten and rant and rave. I just tell them that I have until midnight of the 29th and they’ll collect extra interest…now leave me alone.
Skip Utilities Payment
Like your creditors you utilities will always give you and extra month to pay. They won’t advertise this. But you can just not pay one month and keep carrying that forward until you do have the money to pay.
Of course, the best way to not get behind is to stay ahead. Many a winter time when I was getting started I would work part-time in a camera store. A ding on the pride, yes. Exhausting, definitely. But not having any late payments and enough money to buy presents at Christmas made it worth it. Don’t be afraid, especially in this economy, if you have to do some extra work to make ends meet.
Somehow our culture has turned around the pride of working into a form of shame. “Did you hear about Bob? He had to take a part-time job at Target?” When what should be said is “Wow, did you know Bob was working part-time at Target? That guy will do whatever it takes to support his family.”
There were no great new tips here. Just guerrilla tactics designed to give you enough time to get to the point where you have more money than month. Of course, the best way to avoid all this is to live on less than you make. Save the first 10%, and all that. But until you get to that point, I thought you might like to know about this issue.