You CAN Recover From These 5 Major Financial Mistakes

It's an easy thing to do: blow your entire month's budget on a major splurge, miss a credit
card payment, or get into a little (big) thing that I like to call "The D Word" - Debt. No matter how carefully you manage your finances, you're bound to make some mistakes - and maybe some big ones at that.

I know because I've been there. It wasn't until I had graduated from college and landed my dream job at CNN that I got my first credit card. I know, I know . . . I was a bit behind the times. But I was raised in an immigrant family, where cash was queen and debt was just not OK. I made the move to Atlanta to start my new job, and suddenly there were all of these things that I thought I needed - or at least thought that I deserved. A new on-air wardrobe felt like a must (I was worth it, right?) as well as furniture and decor for my new apartment. After all, I had to be able to entertain all of my new friends in style!

The trouble was, I hadn't experienced the perils of interest before, and by that first holiday season, not only was I broke - I owed $5,000 on my credit card. Ouch. Those $25, $50, $100 purchases made here and there had snowballed into $100, $200, $500 with interest, faster than I ever would have imagined possible. Finding myself in debt for the first time in my life kept me up at night, and I resolved to start the new year afresh and debt-free, or at least, on my way to becoming debt free.

Remain calm, and, whatever you do, don't let one mistake cause your entire financial picture to spiral out of control. With some sweat equity and a few slices of humble pie you can bounce back! Here's how:

Mistake: You missed a credit card payment.

Solution: A recent report straight from the FICO people said that a 30-day late payment would reduce a FICO score of 680 by 60 to 80 points; the same 30-day late payment would reduce a FICO score of 780 by 90 to 110 points. Wait, what's your FICO score?? It's a major part of your credit score that lenders use to assess whether or not to give you a loan. In the case of the above late-payment scenarios: ouch. So where do you start? Suck it up, pick up the phone, and call your credit card company. Explain to them that this is a one-time mistake, and, if possible, tell them what happened. Did you forget to tell them that you moved, and the bill went to the wrong address? Did you recently lose your job? Make sure to get across that you are a loyal customer and plan to use them in the future. You'd be surprised by how far a little humble pie can go: you might keep them from reporting your late payment to a credit agency, and they might also help in removing any fees or other changes that might have been placed on your account.

Mistake: You splurged.

Solution: There's nothing wrong with a little treat now and then - even a big treat, in the event of a bonus or major promotion at work - but keep it up and those treats can add up to a costly shopping habit. It might sound like an oxymoron, but give yourself a "splurge budget": allow yourself five to 10 percent of your paycheck to spend on whatever you want, no questions asked. A little built-in treat will keep you on track while ensuring that the majority of your paycheck goes where it ought to: to living expenses and savings. Already done some damage and can't return it? Wait for the same item to go on sale, and then see if the store will allow you to "repurchase" it for the sale price.

Mistake: You bombed your credit score.

Solution: It's a common problem: it's not so much that you intentionally sabotaged your credit score, as you simply neglected to keep track of it. The good news is that you can recover, but that starts with giving your credit score a little love. It might sound counterintuitive, but now is the time to get a credit card if you don't already have one. Apply regular payments to this card - your utility bill, for example, or gym membership - to make sure that it remains active but doesn't go over its limit (a good rule of thumb is to keep expenses to 30 percent or less of the card's max). To get the most bang for your buck (er, plastic) look for a card that reports to all three credit bureaus: Experian, TransUnion, and Equifax.

Mistake: You used your student loan . . . for something other than textbooks.