Shining light on financial monsters

The thing about this recession is that I know almost no one unaffected. All around me, I've got friends who have been laid off, had their salaries cut, seen their hours pared back, or finished grad school just in time to hit an epically bad job market. My own household is down one job, with an income that's half of what we had a year ago.

My friend Rose recently put up a blog post I found fascinating: Talk about how financially screwed you are. I think it's great, because hearing so many stories helps dispel the thing that perpetuates financial problems. Shame.

When the numbers are awful, you don't want to look at them. After college, when I had a monthly income that fell a few hundred dollars short of what I'd need to pay rent, student loans, living expenses and the bare minimum on a credit card debt that felt insurmountable, I threw bills out unopened. Sure, paying things months late trashed my credit score and racked up late fees and yet more interest charges, but the whole thing felt so hopelessly out of control I psychologically couldn't cope.

Two things finally broke that cycle: 1) David, who had just moved in with me, said that he couldn't stand that approach, and if I couldn't deal with taming my finances, he'd do it for me. He called my credit card companies and dealt with all the logistics of figuring out the size of the problem. 2) David got a job just a month after arriving in the U.S., and suddenly our household income doubled. Step 1 was critical in getting a handle on the problem, but there was no way we could possibly have addressed the financial shortfall without more money.

With the economy at a standstill, most of us can't do anything right now on Step 2, Increase Household Income. But Step 1 is do-able. The first step toward getting rid of the monster lurking under the bed is looking at it. Without letting it make you feel ashamed or afraid or like a bad, horrible person for having a lurking monster -- because hey, recession? Right now, lurking financial monsters are fashionable! Everyone is having money problems! You have company!

(Financial Monsters are spikey and they drool. I also strongly suspect they are purple. The illustrative Financial Monster pictured above is borrowed with permission from Mac McRae's extremely awesome monster gallery.)

This isn't something you have to do alone. If you have a stack of credit card, student loan or medical bills that you aren't paying, or that you don't even know how much you owe on, or the rates are stratospheric but you can't stand the thought of calling to negotiate -- enlist a close friend. Other people's stacks of intimidating bureaucracy are so much less daunting than your own. Have a friend over -- someone with a penchant for organization is perfect -- pour a glass of wine, and dive in. Once you know the shape of the problem, it generally stops feeling like a scary vortex of failure and shame, and starts becoming manageable.

On that note, I'm buckling down tonight to finally sort out our chaotic mess of retirement accounts -- the goal is to turn our two abandoned 401(k)s into IRAs. And over at Rose's, there's a followup post about what people are doing to tackle their financial demons.

And if you're doing financial debugging, here's two past posts that may prove useful:

-Debt statute of limitations - what they are and how to use them, plus a debunking of the apparent myth that contacting a debt collector restarts the clock

-The simplest good investment strategy for your 401(k) (aka "why management fees matter")