What to Do When You Can’t Pay Your Bills

There is no doubt that one of the most horrifying experiences is struggling with money and not being able to pay bills.  I've overcome and am still overcoming financial struggles but there are so many more people and families that are in a more difficult situation. 

There is no magic pill or “one size fits all” method of fixing financial struggles or what I call “financial dis-eases.”  However, here are a few tips to help you get started.

Tip # 1: Assess the Problem

The most important step is to assess why you can’t pay your bills.  This could be because of a job loss, a pay cut, increase in fixed expenses, unexpected medical bills, an expensive mistake or poor spending habits.  After understanding the cause of the problem, the next phase of this step is to write out your budget. I encourage you to download and read “5 Steps to Building a Budget That Works.”  You may of course see that you are spending more than you make.  By writing this down in detail, you will understand your fixed verses flexible expense. 

  

Tip # 2: Fix the Problem

Once you understand what the problem is, you can now begin the process of fixing the problem.  Most people’s problem (like mine was) may be overspending.  If this is your issues, the best cure for this financial dis-ease is financial abstinence by eliminating the use of credit cards or unsecured lines of credit.  Also, cut back on eating out and reduce or eliminate flexible bills like cell phone, land line phone, cable or any other unnecessary expenses.

However, many people aren't overspending at all.  They are dealing with being under paid.  Their income does not meet their baseline budget of their fixed expenses.  If this is your issue, it is now a matter of increasing your income.  This is not an easy cure and may require lots of hard work to find and work a part-time job. You may want to establish a home-based business that generates extra income. 

Here are few ways to handle your financial situation:

1. Ask your family or friends for a loan or gift to assist you during your short-term struggle. Make sure that you only ask them once and make it clear that it is a gift (you do not have to pay it back) or it is a loan (you will pay back).  If it is a loan, establish the payment arrangements and make sure you pay them back on time.  Don’t be that family member that everyone ignores phone calls from because they know you are just going to ask them for money.
2. Contact the company(ies) and creditors to explain your temporary financial hardship and request to skip a payment for the month to get back on your feet or to modify your payments, permanently or for a limited time.  Many financial institutions have a loan modification program that you may qualify for.
3. Contact a debt management organization, like CCCS, to assist you with communicating with your creditors to reduce your monthly payments.  There are many organization out there, some free and some with a cost.  Make sure you do your research before you commit to their services and program, especially if they are requiring a fee up front.  I recommend that you find a non-profit debt management organization that does not charge a fee to assist you.
4. Although I am not an advocate of and try to sway my clients away from this, you may need to consider a short-term loan, payday loan, title loan, etc.  This should be your LAST resort and make sure that you understand the terms, rates you will have to pay and all of the fees.  If this is used the wrong way, you could find yourself in a worse financial condition than you were before you got the short-term loan.  Proceed with caution.
5. When all else fails and you have honestly tried everything stated above as well as other tips you've learned, another last resort option is bankruptcy.  “Bankruptcy is a tool, nothing more, nothing less” says Bankruptcy Attorney & Trustee Angelyn Wright of The Wright Law Alliance, P.C.  When used appropriately it can be the financial major surgery necessary to rebuild your financial well-being and give you a Fresh Start.  If you are considering this option, please make sure you understand what bankruptcy is and does.  When done the wrong way or with the wrong attorney, it may put you in a worse financial situation than you are now.  Get educated and ask questions before you proceed with caution.

Based on personal experience as well as observing and working with others who are dealing with and have resurrected from financial struggles, your financial situation can change if you are willing to work hard enough and can be disciplined.

By the way, don’t be afraid to ask for help.  There are many banks, credit unions, non-profit organizations, and financial coaches like myself that want to assist you.  Contact me at info@ProsperityNowFMS.com for consultation.

No Catalysts To Keep Stocks Up

The markets are lower in early trading.  Yesterday the indexes recouped some of their losses into the close, but this morning the SPX is breaking below its 3-day support levels.  I think this is mostly profit taking after a big run in the market as opposed to news driven selling.

We are getting into preannouncement time for any companies that don't think they are going to make their quarterly numbers this time around.  GameStop (GME) is down -10% after reporting disappointing holiday sales.  YUM is also down -4% after the company lowered its sales forecast for its China division.

Telecom stocks are weak this morning also.  Rumors are that Verizon may purchase Vodafone's stake in Verizon Wireless.

Asian markets were mostly lower overnight.  Japan's finance minister said the country would use its fx reserves to purchase European Stability Mechanism bonds in an effort to weaken the Yen.

European markets are mixed.  Eurozone unemployment came in at 11.8%.  And Eurozone consumer confidence was in line at -27.0, a low figure.

Commodities are mixed this morning as the dollar is rallying.  Oil is a bit lower near $92.90, but gold is bucking the trend and trading higher to $1654.

The 10-year yield is easing back more to 1.87% following last week's spike higher.  And the volatility index is up 3.5% again but still hovering at very low absolute levels of 14.25.

Trading comment: Investor sentiment remains a bit complacent at this juncture.  I have been looking for some consolidation in stocks which should also work off the short-term overbought condition.  While it is true that the number of stocks breaking out to new highs has been growing, be wary of stocks that disappointed last quarter and could be set to disappoint again.

KAM Advisors has long positions in YUM, VZ

Annual Blog Poll

I'm a little late in posting this, but each year I ask all of the folks I know in this business to put together a forecast for the market.  Last year the average forecast for the S&P 500 for the year was for a gain of 8.5%.  As it turned out, the market rose 13.4% for the year.  So our group was a little cautious.

The closest guess came from Scott Lytle (Janus) who predicted the S&P 500 would finish the year at 1420 (only 6 points off).  Congrats to Scott, who will claim his valuable prize when I see him next week.

I am still tallying the forecasts for this year, but I will put together a post when I have all the predictions in so we can see if the group has become more bullish or not for 2013.

Monday Morning Musings

The market is lower in early trade after reaching 5-year highs last week.  Some of the selling is probably profit taking amid lackluster overseas trading as well as lingering concerns about debt ceiling debates, fiscal cliff issues, and upcoming earnings season.

Over the weekend, the CBO said that the fiscal cliff will add bout $600 billion to deficits in future years due to increased debt servicing costs.  It's hard to see how this won't lead to higher interest rates and slower growth in the future.  As for the fiscal cliff negotiations, Senator McConnell said in an interview that "the tax issue is finished" and spending needs to be addressed next.

Financials got a brief boost this morning after global regulators announced that Basel III rules will not be as stringent as originally proposed.

Asian markets were mixed overnight. Japan finished -0.8% lower despite the new PM saying  that his govt's top priority will be to pull the country out of its economic malaise.  China was up 0.4%.

European markets are also modestly lower.  Germany's Minister of the Economy said he expects robust growth in 2013.  This view is at odds with the head of the Bundesbank who said he expects lackluster growth in 2013.

In other commentary, the London Bullion Association said that they think the bull market in gold is over.  For reference point, gold is trading near $1650 currently.  With all of the money printing going on around the globe, it would seem gold has another leg higher in it.  But time will tell.

The 10-year yield is down a bit to 1.89% after briefly topping 1.95% on Friday. 

And the VIX is up 2.5% back above the 14 level to 14.15. I said recently that I thought the 15 level would act as a floor, but we have already moved below that level.

Trading comment: For all the talk in the media about "5-yr highs", the S&P 500 needs to surpass 1475 to get above levels it reached in September.  And the Nasdaq needs to get to 3197, which is still a ways away from current levels of 3090.  So some of this enthusiasm seems premature.  I'm not saying we won't get there, but I think the market is likely to see some consolidation first.  The market had a big first week of trading for 2013, and is currently short-term overbought.  So it would not be surprising to see some pullbacks and consolidation before making another attempt at higher levels.  Of course, the SPX needs to get all the way back to 1576 to reach its all-time high from 2007.  Some strategists think we could see that level bested later this year. 

One-on-One with Senator Ted Cruz

Last week on "The Kudlow Report", I asked Republican Senator Ted Cruz if he'd go with a government shutdown if it came to it on the debt-ceiling debate.  His answer: "I think we have to be prepared to go so far as to shut the government down -- if we don't get some serious policies to stop the out-of-control spending, to tackle the debt, and to get economic growth."

It was a bold statement.  Watch the full video here:

Scheduling Conflict

Mammoth has been hit with 6 feet of snow in the last couple weeks, so In The Money is taking a couple of much needed days or R&R and hitting the slopes.  Please check back on Monday for our regular updates.

Thanks and Happy New Year to everyone--

Stocks Cheer Fiscal Cliff Deal

The markets are nicely higher this morning, as were markets around the globe after Congress voted to approve a deal to avoid the fiscal cliff.  The bill maintains tax rates for the middle class, while raising rates on households making over $450k.  It also delays the sequester for two months.  But it did not include anything regarding the debt ceiling, so we still need to deal with that.

In economic news, the December ISM manuf. index came in at 50.7, which is above the key 50 level and also up from last month's reading of 49.5.

Asian markets were higher once the news came out.  Hong Kong soared +2.9% to new 52-week highs.  Japan and China were closed for holidays.  The PBOC said that the country is likely to maintain its current policy course.

European markets are also higher across the board, with gains of more than 2%.  The UK's PMI came in above expectations at 51.4, while Germany was below estimates at 46.0.

Commodities are also higher this morning.  Gold prices are near $1691 and trying to get back to the $1700 level.  Oil prices are rallying to $93.31.  Silver and copper prices are both higher by more than 2%.

The 10-year yield also got a boost and is trading higher to 1.84%.

As for the VIX, it has plunged this morning back below the 16 level and has been down more than 12%.  I suspect with the issues still in front of the market, as well as earnings season around the corner that the 15 level in the VIX could act as a floor this time around.

Trading corner: Even though we have been moving to a more conservative posture in our accounts recently, we said that when deal gets done the market will likely rally.  The question is does this rally have legs? Remember that taxes still went up on higher income households, and they went up on the middle class as well.  Today's deal doesn't really highlight the increase in payroll taxes as well as the Obamacare taxes that are coming.  Those will not be pro-growth measures.  I want to see if the market can build on this rally, or if it will prove to be a short burst of enthusiasm with little follow through.

KAM Advisors has short positions in the VIX