If Financial Disaster Strikes …

• Protect your home. Don’t borrow against your house. “Refinancing their homes to pay down other bills is the single biggest mistake made by families in trouble,” according to Warren and Tyagi.

• Adjust fast.
When things change, whether it’s a job loss or a divorce, accept the new reality and make major adjustments quickly. “I have met so many [newly] single mothers who try desperately to hold onto the old life for their kids, even when there is no way they can realistically afford it,” she says. “If your circumstances have changed permanently, put the past behind you and get on with building a new life on solid financial footing.”

• Avoid credit counselors
. In stark contrast with conventional get-out-of-debt advice, Tyagi recommends that families stay away from credit-counseling agencies, some of which are being investigated for fraud or have ties to credit-card companies.

• Consider talking to a bankruptcy attorney
. Warren and Tyagi encourage families to think strategically – like a business. When your family’s welfare is at stake, put aside any guilt you may feel and do what you need to do to protect your family.

Read more about The New Money Rules

  • Improving Your Odds for Financial Stability
  • The Truth About Getting In & Out of Credit-Card Debt
  • My Generation: Risk, Security and Savings

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