When we think of recovery, usually we’re drawn to thinking about overcoming an addiction, but the word recovery can mean much more than that. The disease of addiction unfolds in stages that can damage everything from your physical and mental health, to your relationships, career, and finances. Recovery can mean overcoming addiction while picking up the pieces of the life you once knew, in an effort to build a new life for yourself, outside of the confines and consequences of addiction.
Recovering Your Financial Well-Being
Drugs and alcohol erode stability and this process can have some pretty discouraging financial consequences. However, the good news is that it is possible to repair the damage. The repairs may take a number of years, but if your commit to face the problems and the issues that may arise while working to solve it, your success will be a sweet reward.
The first step in recovering your financial well-being begins with addressing the addiction. Only then will any of these other problems truly be addressed in a sustainable manner. The next step following your recovery from addiction is to examine how much debt has accumulated. This task can be overwhelming and maybe best tackled with a trusted friend, or in stages.
First, sketch out the most urgent areas of debt. For example, are you about to be evicted for non-payment? Are the utilities being threatened? List these first, even if larger debt looms.
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Next, examine all areas of debt, whether to a credit card company, a family member or friend, student loans, medical bills, etc. Consider the following:
- What is the total amount owed?
- What is the minimum payment required?
- Are you being charged late fees?
- Are your payments increasing exponentially due to non-payment?
- Which have the highest interest rates?
- Can any of the debt be consolidated?
The next urgency is in those late fees and increasing payments. A once manageable credit card payment can skyrocket if you fail to make timely payments. At the opposite end of the spectrum, hospital debt does not usually accumulate interest. It also tends not to have the same effect on your overall credit score.
Following this assessment, look at any income you have currently. What kind of repayment can you make presently? After the rent or mortgage and utilities, is there enough left over to begin paying down your debt? If you find your living expenses, including food costs and possibly childcare costs, are too high, you may qualify for state assistance in these areas, allowing you some opportunity to begin paying down some portion of the debt.
Before considering bankruptcy, which can also be costly, contact each of these creditors and ask whether there is any level of forbearance (a delay in payments) allowable or whether they would be willing to write off a portion of the debt given the circumstances. While this can negatively impact your credit, it is better than no attempt at repayment and will show you made an effort to manage your payments reasonably.
Next, make a commitment to payments. Remember, creditors want to be paid back, so any effort you make represents progress. Even after an agreed-upon payment plan, some creditors may still hound you with calls, but keep making the agreed-upon payments and try not to agree to a higher payment, unless it is reasonable for you to do so. There is no shame in being honest with what you can and cannot, afford to pay.
Get creative. If you owe money to a credit card company but have some equity in your house, you may consider refinancing your home to help pay down some immediate debt. Or perhaps a relative can relieve you of the stress of interest rates and by creditors.
In other cases, you may seek a delay in payments of one debt until another is paid off. This is another type of forbearance. If you have an urgent need to pay off a bill from a creditor, but you also owe your aunt and uncle money, consider asking them if you can delay payment. At this stage, and in many cases, you are rebuilding trust. You may even offer to help with a chore in the meantime until you are better able to repay your debt.
If, in the end, the amount of debt you owe is so large and looming, and no agreements can be made, bankruptcy may be considered as a last resort. Keep in mind, not everyone is granted bankruptcy and legal costs may add up to a few thousand dollars. Research whether the credit harm caused by a bankruptcy does or does not outweigh your current credit crisis.
Fixing Financial Problems Following Addiction
Consider Following These Steps:
- Address the addiction first and foremost
- Seek help from a trusted friend
- Assess any urgent repayment issues (rent, mortgage, utilities)
- Assess types of debt and rank according to associated fees, penalties, etc.
- Examine your income and what money is available for repayment to creditors
- Do you qualify for food or other state assistance?
- Contact creditors and find out whether forbearance or write-offs are possible
- Make only reasonable payment plans (promise only what you can afford to pay)
- Move one debt to another form of debt
- Research whether bankruptcy is an option, if all else fails
Addressing Financial Security
At this point, we’ve really only addressed debt. There’s more to financial health than paying others. A good financial advisor will tell you to create an emergency savings fund. This fund usually involves enough savings to offset a period of unemployment spanning three to six months. To arrive at this number, consider all of your agreed-upon payments, mortgage or rent, utilities, and living expenses and multiply that by a minimum of three months. This may seem like an impossible target, but setting aside a small amount of money each month can make a huge difference when needed.