The scenario is unfortunately common: people have lost their jobs or are suffering as a result of the recession. They’ve exhausted their options, have done everything possible to get a higher paying job in an incredibly competitive job market, and they’re not sure what to do next. The question may be, should you tap into your retirement accounts to pay the bills, or is it better to get behind in payments and ruin your credit.

According to Jack Guttentag, there is no right answer, but often times it’s a matter of missing your payments this money and facing the inevitable, or missing your payments next month. The question may also be a moral dilemma since, as a borrower, you are obligated to make the payments. But if you can miss your payments this month and keep your money to help you get out of a rut, that may be the better long-term strategy.

Of course there are implications to doing this, since it can hurt your credit score if your lender decides to report your late payments to the credit bureaus. However, by delaying your payments you could be buying yourself time to find a higher paying job.

Another alternative for those who are facing financial hardship and don’t have enough money to make their payments, is to see if you qualify for a loan modification. This is the process of re-negotiating your existing mortgage with your bank in order to make your payments more manageable. If accepted, it is important to consider the tax implications that can come with a home loan mortgage modification, and is something you should discuss with a certified financial advisor.

Did you know that if you were to make just the minimum payments on your credit cards that it would take the average person 120 months to become debt free? That’s 10 years to just to pay off your bills, and you don’t want to know how much money in pure interest that you would be paying. Let’s just say that the TV you bought in the year 2000 for $500 would just be getting paid off today, and it would have actually cost closer to $3,000 from interest on your credit card.

But when you follow the Dave Ramsey Debt Snowball plan, you can be debt free in 21 months — that’s 99 months quicker than the average person. It’s not hard, and when you see how it work  you’ll realize why this method is so effective. The great thing is that once you are done paying off your bills, you’ll have so much excess cash that you can start building some serious wealth to become completely financially free.

1. Come up with a $1,000 emergency fund so you have some savings set aside
2. Minimize your expenses by reducing your spending on unnecessary things
3. Follow the Dave Ramsey Debt Snowball plan to eliminate debt
4. Now invest your money to build real wealth