By James Bailey, CEO, Operation HOPE
If the recent financial crisis taught us anything, it is that prosperity must be built on a solid foundation for it to last. It may be lucrative for some to capitalize on economic bubbles, but far more people are left holding the bag at the end. The financial hangover is never worth the temporary wealth created.
Problems at the national level are comparable to those also experienced by households. Like many businesses, some people also built their life on a shaky financial foundation; they borrowed prosperity instead of building it, hoping their income would keep pace with spending. Others were simply victims of the recent economic downturn and a weak job market. Regardless of the cause, many people find themselves in difficult circumstances but are ready to move forward with their life and take control of their finances.
Recovering from past financial mistakes requires hard work, but it can be done with a sound financial plan. Below are three things to tackle first in order to get back on your financial feet.
Begin rebuilding your credit
A good credit score is vital to securing favorable terms on a loan for a home or a car, as well as renting an apartment and even getting certain jobs. If your credit score took a hit over the past few years, the first thing you need to do is begin to repair it. Paying down debt on time will gradually improve your score. However, remember that a credit score is based on your history of handling debt and having a few good months will not erase years of late or missed payments. Consistency and perseverance are vital. For more information on credit scores, visit www.operationhope.org and click on credit counseling.
Open a bank account (if you don’t have one already)
According to recent statistics released by the FDIC, about 10 percent of households in the South do not have a bank account, as compared to the national average of 8.2 percent. If you are among the unbanked, create a plan to open an account so that you can monitor finances and keep track of your budget. Put money aside each month so you will have enough to meet a minimum balance to avoid monthly fees. In the interim, consider using a prepaid card for daily purchases. Not only is it safer than using cash—you can freeze the card and get your funds re-issued to you if it is lost or stolen, but it also gives you all the convenience and access to online and phone payments and shopping. You choose how much money you want loaded on the card and have another tool to control your overall spending levels. Sticking to a budget will be important if you are trying to sock money away.
Protect what you have
Building up your credit and saving money will not do any good if you are susceptible to identity thieves and fraudsters. Check each of your three credit scores – Equifax, Experian and TransUnion – once a year to make sure somebody else has not opened an account under your name. It’s a free service. You may even want to consider freezing your credit so that nobody can view your credit file except for you. Also, avoid carrying around wads of cash in your pockets or storing it at home. Payment cards – such as debit, credit or prepaid cards – are much safer since the many card issuers will refund any money that is lost or stolen.
There are many resources for those looking to turn around their finances. The Operation HOPE website for example, offers useful advice. MasterCard also recently launched a campaign in Georgia called Master Your Card – Georgia, which offers fraud prevention tips, the pros and cons of different payment cards and ways to fully take advantage of the benefits of electronic payment technology. That website is: www.masteryourcardga.org.
In November, Operation HOPE will open its flagship HOPE Financial Dignity Center, Ebenezer, which will offer a range of free financial education tools and services to the community, from credit counseling to entrepreneurship training. The HOPE Center was built with the support of several partners, including MasterCard, and represents our effort to empower metro Atlanta’s citizens to achieve financial dignity, which we believe is a prerequisite for obtaining personal wealth and building strong communities.
James M. Bailey is Chief Executive Officer, Operation HOPE Atlanta. Operation HOPE is a global nonprofit organization dedicated to promoting financial dignity and empowerment.