I met this girl once (let’s call her Jan) that found herself in financial peril. Jan was one of the most vibrant girls I ever met. She loved life and lived it to the fullest. Unfortunately, she was never taught how to handle her finances. Even though her parents didn’t have the ability to help pay for college, it was still imperative that she went away to college. After all, you only get one chance at going away and experience college. The good news is that Jan wasn’t afraid of hard work and was able to find a job off campus. Of course, it meant she needed a car. She didn’t have the money, but figured she could easily make the payments because she would be working. Unfortunately, the car payments ate up much of her monthly paycheck, and so she needed to live off credit cards – but only for a little while – or so she thought. By the time she graduated, her debt was out of control. She was able to find a job, but it was not in her field of study, and it was way below her needs…based on her accumulated debt. She was soon living on her aunt’s couch and defaulting on her loans – with little hope. She was able to enjoy life early, but unfortunately she has many years of struggles ahead of her.

Sadly, these stories are not uncommon. Recent studies show that 35% of people have poor or bad credit. So, look at your neighbor to your left; now look at your neighbor to your right. The odds are that one of you has poor credit. Of course, no one gets there overnight, and so any fixes won’t happen that way either. In fact, if you have defaulted on loans, it generally takes about 7 years for it to fall off your credit report.

Did you know that constant credit checks from lenders (not you personally checking) can hurt your credit score as well? If you are looking for a loan for a car, house or other large item, it is best to do your research and then inquire about a loan from the lenders within a one week span; this way the credit check inquiries will be grouped together, and have little negative impact on your score. Now to the contrary, if you drag the search out over weeks, or even months, the impact on your credit score could be much more significant.

What about credit cards? We live in a digital world now, and so it might be necessary to have a credit card for convenience. The key is to pay off that credit card every month. And the key to not letting it get out of control is to follow a tried and true budget.

Unfortunately, not only do many people skip making a budget, they often have no real concept as to how far in debt they are. Credit card debt, house loans, auto loans and student loans can easily spiral out of control. We try to deny reality; but before we know it, reality smacks us upside the head. We get desperate and begin to panic. We start pointing the finger in every direction, except our own. And before we know it, our life, our marriage and our friendships begin to fall apart and we become bitter and angry.

Now, I would love to tell you that Jan was able to turn things around and is now living a fiscally responsible life. Again, I would love to tell you that. I just can’t.

“Do not be one who shakes hands in pledge or puts up security for debts: if you lack the means to pay, your very bed will be snatched from under you.” Proverbs 22:26-27