When I was young and stupid, I accumulated more than $100,000 in credit card and other non-mortgage debt. I didn't get into that mess overnight. It took 12 years and many financial mistakes along the way to nearly ruin my life.
During the 13 years it took to get out of the mess, I learned how important it is to deal with mistakes as they happen so they don't turn into major setbacks.
No one is perfect. You're going to make mistakes, and when you do, you need to know how to react and what to do to minimize the damage.
Undo it. You may be able to cancel the agreement or return the purchase for a refund. Move quickly to make every reasonable attempt to get out of it.
Learn from it. Rather than burying yourself in guilt, take a look at what went wrong. Making a mistake is understandable. Repeating it is not.
Financial mistakes come in all sizes, from a bounced check to a whopping mortgage. These are the big mistakes I hear about most often:
Monster auto loan
All you really wanted was an oil change. Instead you left in a brand-new $58,000 luxury car with 72 monthly payments, or worse, a lease. How will you ever make $800 payments?
Whether you've made payments for a few months or a couple of years, it's likely the car is worth less than the amount you owe. That complicates matters. Still, you may have options.
Refinance: Interest rates are likely to be lower now than when you signed that monster loan. If your car is a late model with fewer than 80,000 miles, you should be able to refinance at a lower rate. Call your credit union or bank, or apply online at sites like Capital One and rateGenius.
Sell it. If you owe more than the car is worth, you may have to get a loan for the difference so you can transfer the title to a new buyer. But you'll trade a huge car payment for a smaller payment you'll be able to pay off quickly.
You should have held out for a month-to-month membership, but you signed a three-year deal. Now you have to live with it. Or maybe not.
Find the exit: Read your contract carefully. Look for a cancelation clause or exit fee. Compare that fee to your monthly fee times the number of months that remain. It may be cheaper to pay the exit fee now and stop the bleeding.
You needed a quick fix. You wrote a $300 post-dated check, and they handed you $255 cash. Then, something happened, and you repeated the action, and now you're caught in a major bind. Things are way out of control.
Sell something: You have to come up with cash quickly. Figure out what you own that you could liquidate to begin paying off this huge debt you've accumulated.
Know the laws: Many of these payday loan outfits, I'm learning, do not adhere to state laws. If you can prove yours is breaking the laws of the state in which it is lending, threaten it. Then, negotiate to pay only the amount of money you actually borrowed sans fees. It just might work.
Find support: A wonderful forum, located at a most unlikely place on the internet, may have just the information you need to fix your problem. Go to the National Foundation for Credit Counseling website, or call 800-388-2227. This is the credit counseling organization I trust and recommend. If anyone can help you with this huge problem, these folks can. You can trust them. It's worth checking it out.
I doubt any of us will reach the level of perfection where we never make any financial mistakes. But I can tell you from my own experiences that they will become fewer and farther between.
The secret is to quickly face up to it, fix it, learn the lesson and then go on wiser, and hopefully not poorer, for the experience.