Whether you've spent 20 years in prison, gotten divorced or just plain screwed up, here's how to rebuild your financial life, step by step.
Imagine what life would be like if you were frozen a generation ago and were suddenly thrust into today’s world. You might survive, but could you thrive?
Here’s this week’s question:
I’m a 52-year-old released from prison six months ago. I have a checking account, but no credit to speak of. I have medical problems but no insurance, have a job but barely make ends meet, and have a wife who can’t live with me because I have no home of my own. But I’m a person who flat refuses to give up when the deck is stacked against me. How does someone start their life over after 21 years in prison?
The short answer to your question, Bearl, is that you start over the same way people have for eons: by putting one foot in front of the other.
The first thing to understand is that you’re not alone, or even rare. Not to downplay your hardship — you’ve got a tough row to hoe. But the world is full of people forced to try again. People who get divorced. People who go bankrupt. People who lose everything to fire, flood, earthquakes or war. People who lose their health, or the love of their life. It’s happening everywhere every day.
The beautiful thing about adversity is that you’re the one who decides whether to lie down and give up or to treat your difficulties as challenges in the epic adventure of your life.
Let’s go through your issues one by one.
What to do when you have no credit
Here are some ideas to build a credit history from scratch as quickly as possible.
- Talk to the bank you’re currently doing business with, preferably in person, and explain you’d like a low-limit credit card to establish your credit. If you don’t get a friendly response, try a credit union. They’re often easier to deal with than big, national banks.
- Get a cosigner. Having someone cosign a loan or credit card means they’ll assume responsibility for your bills if you don’t. There will, of course, be very few people willing to take on that risk, but if you can find one, it will help.
- Become an authorized user on someone else’s credit card. This means getting a credit card tied to someone else’s account. They remain legally liable for the bill, but you get a credit file established. The good news is that piggybacking on someone else’s credit file essentially gives you an instant credit history. The bad news is that if their credit history goes south, so does yours.
- Open a department store charge account. They’re typically easier to get than credit cards from banks. These cards, however, carry high interest rates and can rarely be used elsewhere. If you use one, be sure you can pay it off every month.
- Get a secured credit card. This is a credit card secured by money you put up as collateral in a savings account. Put up $500 of savings, get a $500 limit. This is the easiest credit card to get, but be sure they report your timely payments to credit reporting agencies; not all do. You can search for secured credit cards here.
- Don’t worry about building a credit history. While it may be hard to believe, there are billions of people in the world who don’t use credit. Some of those people may even be your friends and neighbors.
Like everyone who’s starting out or starting over, you’ll ultimately develop credit simply by paying your bills on time, every time, for long periods of time. But keep in mind that credit isn’t mandatory or even necessarily desirable. There are more important things in life than having the ability to pay interest.
What to do when you have no health insurance
It wasn’t long ago that there was no answer to the question of what to do if you needed health care and couldn’t afford it. Today, at least for now, you have options.
While you were away, the Affordable Care Act, also known as Obamacare, became the law of the land. Millions of Americans who previously couldn’t afford private health insurance now can. And millions more are now eligible for government-supplied health care in the form of Medicaid.
Read this page of healthcare.gov for help applying for low-cost health insurance online. You can check here to see if you qualify for a subsidy to help pay for health insurance. And if you prefer face-to-face assistance, this page will help you find help locally.
Unlike credit, your health is super-important. No matter your financial situation, there’s help out there for you. Find it.
What to do when you’re not making ends meet
If you find yourself with more month than money, you only have two choices: make more or spend less.
The two obvious ways to make more money are to ask for a raise or switch to a higher-paying job. Unfortunately, in many cases that’s easier said than done, especially when you’re starting out or starting over.
Still, step one is to earn as much as possible by seeking a raise. If that doesn’t work, develop a side hustle.
One of the most common questions I get is how to earn extra money. The ways to do it today are limited only by your energy and imagination. From bartending to delivering packages to freelance writing, there’s something for everyone. And that’s especially true now that we have the internet — the greatest source for extra income ever devised.
Here’s a small sampling of articles we’ve published on the subject. Most of these opportunities didn’t exist just a few years ago.
- “50 Ways to Make a Fast $50 (or Lots More)”
- “20 Clever Ways to Make Extra Money”
- “How to Make Extra Money While Running Errands”
- “7 Steps to Start a Pet Sitting or Dog Walking Business”
- “Buy and Deliver Groceries as a Profitable Side Gig”
- “Earning $50 an Hour as a Tour Guide”
- “How to Make Extra Money Buying Locally, Selling Globally”
- “How to Turn Your Love of Cooking Into Extra Cash”
- “Top 25 Companies for Work-From-Home Jobs”
If you need additional inspiration, just do a search for “making extra income.” There are thousands of ideas out there. Just avoid any that require you to pay them before they pay you.
So much for making more. What about spending less?
Whenever someone tells me they’re not making it, this is the first question I always ask: “Are you tracking your expenses?”
No matter your situation, the Step One to squeeze more money from any budget is tracking exactly where your money is going. In pre-internet days, this was a laborious process involving pencil and paper. Now it’s simple, thanks to free online services like Mint or PowerWallet.
Once you start really seeing where your money’s going, you’ll start discovering ways to save. Some will be obvious, others may require some thought, and still others, sacrifice. But if you’ve never really looked at what you’re spending money on, doing so will almost always reveal some ways to spend less. Here’s a good article to check out: “10 Ways to Save When You’re Making Minimum Wage.”
The bottom line
When it comes to succeeding, the most important quality is the one Bearl alluded to above: “I’m a person who flat refuses to give up when the deck is stacked against me.” Good for you, Bearl. No matter how dire the circumstances, persistence always pays. The world you’re entering today offers infinitely more opportunity than the one you left behind. Read, study and keep showing up, and you’ll find yours.
Got a question you’d like answered?
You can ask a question simply by hitting “reply” to our email newsletter. If you’re not subscribed, fix that right now by clicking here. The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. If you’ve got some time to kill, you can learn more about me here.