A couple of weeks ago, I wrote an article about Standing Your Ground. I discussed collectors and a few best practices when dealing with them. At the end of the article, I made the following statement:
I encourage you though to find a way to resolve your debts so that you can build a solid financial house. A house with holes in a few windows (the bad debts) doesn’t look too appealing. Does it?
Although I used broken windows as an analogy, it’s actually a theory first introduced by James Wilson and George Kelling. A portion of the theory states:
Consider a building with a few broken windows. If the windows are not repaired, the tendency is for vandals to break a few more windows. Eventually, they may even break into the building, and if it’s occupied, perhaps become squatters or light fires inside.
Or consider a sidewalk. Some litter accumulates. Soon, more litter accumulates. Eventually, people even start leaving bags of trash from take-out restaurants there or breaking into cars.
The underlying meaning is that when a window is broken in the neighborhood, it should be fixed immediately. This more than likely will deter further damage from those that are attracted to vandalize. Cleaning up the sidewalk every day, prevents others from seeing the need add to the pile.
Now, as I consider it here, I think about broken windows in terms of the financial house most of us are striving to build. We all have some type of structure we reside in whether it be a single family home, condo, an apartment, etc, right? Well, when a window is broken, you have to make one of two choices: fix it or ignore it.
To warn you of potential danger, I’ve created a short list of “windows” to be aware of and offer some encouragement of right action along the way.
- Credit Limits
When you’re trying to get your money train back on the right track, your credit limit is something you might want to keep under your radar. Why? There are two reasons: one – to avoid the trap of the “over the limit fee”, two – to help your credit scores. A high balance greater than or equal to your maximum credit limit does not have a positive affect on your credit scores. And how does it look to potential lenders? Not good at all. Though you may pay your bills on time every month, you’d be considered a high risk.
- Credit Reports
Since we’ve looked at the credit limits being a broken window, let’s look at the larger picture of the full credit report. It must be checked. You have the right to obtain a free copy of your credit report once every twelve months from each major reporting agency: Experian, Equifax and TransUnion by way of www.annualcreditreport.com. A good idea is to not request them all at once. Spread the three requests out asking for one every four months checking for accuracy.
Xenophon says, “…but accuracy is everything.” I couldn’t agree more. Checking everything from the personal and public information, as well as the credit history. If anything looks strange, you have a right to request an investigation. Don’t let the litter accumulate.
- The Mail
This broken window will probably require some time a patience, but it’s repairable nonetheless. You know that pile of bills you’ve got stuffed over in the corner? Yeah, that one. It’s time to pull it all out and deal with it. Yes, the time is now. Believe me, it’s not going away.
It’s easy to put it to the side and say, “I don’t have time for this right now.” But if not now, when? Small debts become collections, collections become judgments, judgments become garnishments. A little extreme, but some collections may even lead to jail time (click here to see a recent newspaper article about that).
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The bottom line is this: Being held hostage to unwanted guests is not going to be an option if you don’t repair your windows quickly. As stated earlier, this is a short list of ideas (things we may ignore). You could probably think of some examples from your own situation or someone you may know. Feel free to write about it in the comments.
Thank you so much for spending your time here with me today!
Image Cred gregoreosz
{ 6 comments… read them below or add one }
I love this concept and the way that you explained it! Mail was a broken window for me many years ago and because of it, $25 ended up costing me over $10,000!
Whoa!!! Thank you so much for sharing that Khaleef. I know it will be a testimony to someone who has a pressing issue that needs to be dealt with now.
All too easy to cast a blind eye on our finances. It can feel so stressful to be in debt or simply not have enough money to pay all of our bills. Yet ignoring it just results in more stress.
I like your broken window analogy. One broken window becomes two broken windows… before we know it we’re in a mess.
Great article Patrenia! Love what you are doing with your blog!
-Susan
Yes, ignoring seems to be a better result (for the short term). Thank you so much Susan for the encouragement!
Hi Patrenia,
Just browsing through your blog, I am really enjoying what I read. You have a beautiful way of explaining things.
I too truly believe, that a chip on a windshield always leads to a crack and a need to change, but if the chip was taken care of immediately the crack would have never appeared therefore no need for changing of windshield.
Same goes for finances, my mom also loved not opening her mail, and a tax bill of $300 dollars lead to owing $7,000, little credit card bills, that never got paid, and finally led to loosing her home (condo) due to bankruptcy. All just because she was not able to deal with that one little issue at hand because at that time it just seemed so big and overwhelming.
Lesson learned, always call your creditors and discuss any issues at hand. They often will help you in resolving them quickly, and your credit will stay in tact.
Thanks again for making me remember,
Eva Kaczkowski
Thank you so much Eva for your encouragement and sharing your Mom’s story. It’s definitely amazing how we allow little things to be so enormous in our minds. It’s the disease of procrastination. Great example of a lesson learned!