First Person: We Were Living on the Edge of Financial Collapse

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We were only one paycheck away from being homeless during the last recession. With so many people I knew losing their jobs in Florida; I was scared into becoming financially responsible. According to the "Assets & Opportunity Scorecard," cited by a recent Daily Finance article, close to half of people living in the United States are on the verge of financial ruin. Many people have zero savings as a safety net in case they have a health emergency or job layoff.

Florida was ranked 47, according to the Corporation for Enterprise Development's most recent scorecard. Florida received a D grade for "financial assets and income," followed by a D for "business and jobs," a D for "housing and homeownership, a D for "health care," and a C for "education."

Even though many of my neighbors lost their homes to foreclosure and friends lost their jobs, we stepped away from the financial cliff by making radical changes to our budget.

Increasing my net worth

One of my goals during the recession was to increase our net worth. We wanted to have more assets than liabilities or debt. During the recession, we were underwater on our mortgage, owing more than our home was worth. We also had a car loan and credit card debt. The median net worth of people in Florida was $49,470 compared to the average net worth in the United States of $68,948. We increased our net worth by paying down our mortgage. We now have $30,000 of equity in our home, which counts on the "asset" side.

Talking to a debt collector

According to the opportunity scorecard, a major sign that a person is struggling financially is when a borrower is 30 to 60 days overdue on bills. The percentage of borrowers 90 or more days past due in Florida was 6.89 percent, compared to 4.33 percent in the United States. I changed things around by talking to a debt collector. I made the decision to take responsibility for my credit card debt. The scorecard showed the average total revolving debt in the U. S. about $10,000 and close to $12,000 for people living in Florida. We lived on just my husband's income until we could pay off all our credit card debt with my paychecks.

Saving for retirement

My husband and I decided to max out our Roth IRA accounts during the recession so that we could have a financial cushion. We like the fact that there are fewer restrictions on taking money out of a Roth IRA compared to a 401(k). During the recession, we had zero money in an emergency fund. By contributing to our Roth IRA accounts, we built up a retirement fund that could also serve as a backup emergency savings account.

According to DailyFinance, there are many signs that a person can be headed toward a financial meltdown. We turned our financial situation around by saving, avoiding overdraft fees, throwing away the bank "convenience checks," paying with cash, settling our accounts by talking to debt collectors and saving for retirement.

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More from this contributor:

Accumulating Wealth on Less Than $30,000 a Year

4 Steps to Breaking my Debt Addiction

Taking the 'Spent' Challenge


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