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DIY finance repair: Pulling yourself back from the edge

By Justin Boyle

Woman contemplates billsConfession time: I'm an inveterate do-it-yourselfer. I've fixed vacuum cleaners, sink faucets, coffee tables, lawnmower engines -- you name it, I've tinkered with it. DIY efforts are usually successful if you follow the right advice, and the lessons you can learn from fixing your own stuff can stay with you for years afterward.

If you've been cavalier with your credit cards or run up a few big expenses lately, you might need to approach your finances with the same attitude. Here are some red flags to help you spot potential problems and some fix-it tricks that help get things back in working order.

Signs of trouble

It's sometimes a fine line between running rough and beyond repair. If these situations sound familiar, a financial tune-up might help you prevent an emergency:

  • Making minimum utility payments. Minimum payments on a credit card are bad enough, but only paying the power company what it takes to keep your lights on month to month and never clearing your account to zero should tell you that something's really wrong.
  • Stressing out about everyday purchases. If you find yourself struggling to find the money for a tank of gas or a trip to the grocery store, there's probably some work to be done.
  • Buying on credit with no savings. It's true that a perfectly functional personal finance strategy can include a certain level of debt, but it should be kept to a minimum without a savings account or other safekeeping instrument to back it up.
  • Repeatedly maxing out or overdrafting. You probably won't ruin yourself financially with an occasional slip-up, but danger may be lurking just around the corner if hitting your credit limit or overdrafting your checking account becomes a habit.

Any one of these signals alone might just indicate sloppy habits -- two or more and it's almost definitely time to get to work.

DIY finance repair

If it's clear that some repair work is needed, start by shifting your financial health to the top of your priority list. Understanding that it's the most important thing on your plate can help you apply these fixes with confidence:

  • Cancel your nonessential obligations. There are almost certainly a few things in your life that you pay for regularly but don't need. (I'm looking at you, cable television.) Take an honest inventory of where your money goes every month and get rid of the luxuries.
  • Investigate debt consolidation. It isn't always the right time to consolidate your debt, and not every lending institution has your best interest in mind, but a reasonable set of payment terms on a debt consolidation loan can take a load off your mind.
  • Get a job upgrade. While it may be easier said than done, it's probably more of a possibility than you think. Sign up for some online job boards and set a few alerts for jobs in your area that match your skills. You might be surprised to see what's out there.

If you own big-ticket property (investments, a second car, etc.), you might consider liquidating to get a leg up on busting your overgrown debt. You'd likely be selling those anyway if your DIY fix doesn't work.

The nuclear option

Bankruptcy isn't a do-it-yourself technique, but it's often what happens when your situation gets too far out of control. If bankruptcy seems right for you, it's best to speak with an attorney or an expert in the field about how to proceed.

Remember, bankruptcy filings aren't free, and the repercussions for your credit score can haunt you for years afterward. If you're only skirting the edge of the abyss, filing for bankruptcy before trying to make things right yourself is almost certainly more trouble than it's worth.

Just like most DIY projects, fixing your finances with a little grunting and elbow grease might be a struggle from time to time. But also like most DIY projects, if you do it right, the results will give you a sense of personal satisfaction that you can take all the way to the bank.

Image: David Sacks/Thinkstock

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