Financially “Treading Water”

I am not behind on any of my payments to credit cards or other bills. However, I feel like I’m just treading water and if anything ever happened it would be a financial disaster. I am currently a student, so I don’t have any real income coming in. I also have no family help. Do you think that credit counseling would be of any help?

Although in the past we referred a number of lawyers to one of the best known credit counseling agencies, feedback from several of those we referred suggests that the primary function of such agencies (and beware of some that may be unsavory) is to negotiate a payment plan to permit the consumer to pay off large balances. In some cases, where it is clear that no plan agreeable to the banks is feasible for the consumer, they have recommended (probably appropriately) filing for bankruptcy. Apparently, either course of action can affect your credit report.

It sounds like you are in a different position, not caught up in unmanageable debt but seeing the potential for a problem if you had an unanticipated major expense. In fact, you might be forced to incur more debt in such a situation, and of course it would be highly desirable to minimize the extent of this debt that goes to credit cards, which have such high interest rates. It would be worth investigating whether there are other types of loans that may be available to you as a student for expenses not directly related to school – these would likely not be subsidized, and would incur interest from the start, but (if available) might offer more reasonable interest rates – the hope, of course, being that you will be in a better position to pay your debt after graduation (especially if the economy improves by then).

For starters, we would recommend that you confer with someone at your school’s financial aid office. Your bank or credit union may also offer advice (at no cost) on maintaining good credit and managing/preventing debt. Depending on what you learn from those free sources, it could also be useful to meet with a financial planner or counselor – this can cost several hundred dollars, or you might be able to find someone who works on commission from investments (obviously you have nothing to invest right now, but someone might be interested in establishing a relationship with you based on hopes for future investments). If you are a Massachusetts law student, feel free to arrange a (free) interview with us at LCL, and we can help a bit in sorting through resources (though we ourselves are not financial planners or counselors).

There is also good advice to be found in books by reputable financial advice authors such as Suze Orman and David Bach, and on their web sites. It’s a good idea to flip through the books at a bookstore to see which ones comprehensibly address your concerns (and probably best to favor those put out by established publishers). If you choose an expensive book, however, you may find that you can purchase a used copy on-line for just a few dollars.

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