We have all made mistakes in both our lives and with our finances. A bad financial decision does not have to completely cripple you financially though.
There are a few things that you can do to try and get out of a bad financial decision. Here are a few tips that you may want to try instead of simply abandoning your debt which should almost never be your course of action.
Look For Secondary Markets To Sell Your Mistake
There are many secondary markets where you can sell your bad financial decision to someone else who might be able to afford it. If you are upside down on your car, you can try to sell it on Craigslist or to a dealership.
Even if you have to sell your car for a loss, it may be a better option than continuing to make a car payment that you can’t afford or defaulting if you have a loan. If you can’t afford your mortgage payment, try selling your home yourself or you can try a short sale process with your bank lender, a process that lets you sell your home for less than you owe on the loan without penalty.
If you bought a timeshare at some point, there’s a secondary market for that as well. You can try SellMyTimeShareNow.com to sell a timeshare though you will probably only get back a small portion of what you paid originally.
Dip Into Your Emergency Fund To Get Out
Another great way to help you recover from a financial blunder is to dip into your emergency fund to help you get out from under the financial mistake. That is the whole reason for having an emergency fund, right?
I did this recently when I sold my car to get out from under the loan and from being upside down. It was easier for me to dip into my emergency fund to completely pay off my car loan or the difference between the selling price and my loan balance rather than taking out another small loan for the balance and still being in debt.
The trick is to rebuild your emergency fund as soon as you can after dipping into it to ensure that it is built back up to that magical three to six months of living expenses mark.
Bankruptcy Should Be Your Last Choice
Another way to get out from under the financial hole that you may have put yourself in is by declaring bankruptcy. This of course should be your last option and only be considered after you have talked to a bankruptcy lawyer and a debt consolidation expert.
Having a bankruptcy on your credit report will destroy your credit score. It is the equivalent to a nuke on your credit score. It is slightly worse than having a foreclosure or a short sale of your home when you consider the damage it does to your credit score.
And, as I said earlier in this article, walking away from your debt should almost never be one of your choices. You fully committed yourself in a contract to your purchase whether it was a house, car, timeshare, or other venture. You should honor your commitments if at all possible. There are other avenues for you to pursue such as selling your asset for a loss if you have to in order to get out of a bad financial decision.
Have you ever managed to get in a bad financial situation and had to use one of these methods to get out? Did you find another way out? I’d love to hear your thoughts in the comment section below.
6 thoughts on “Three Ways To Get Out Of A Bad Financial Decision”
Good tips. I totally agree on not declaring bankruptcy. First, It’s going back on your word and it also just destroys your credit as you said. After I had racked up $20k in credit card debt I had looked at this option but chose against it. I eneded up having them consolidated, which that itself did not affect my credit, and it worked out great. I just had one monthly payment to make as opposed to four and they were able to get my rate dropped significantly as well.
LOL, well, this wouldn’t qualify as a financial mistake, but I did have to shell out a whole lot of money for a bridesmaids dress recently – and you better believe I looked for a secondary market to sell it (a consignment shop) as soon as the big day had passed!
I like the first two but just don’t think the 3rd should be an option. I know other may say different but in most cases you put yourself in that position and you are going to kill yourself slowing for a long time. Using the secondary market is how I got rid of my most expensive car payment.
I hate too admit it, but both myself and my boyfriend have used some of the options above. I’ve done a shortsale. And, he has a mountain of school and credit card debt. Come to think of it, I don’t know many people that haven’t had to turn to alternative financial solutions. Thanks for the posts.