Your Finances, Your Future - Managing Your Debts

Do you need a checkbook check-up?

Many people find themselves dealing with debt problems at some point in their lives. The good news is with planning, discipline, patience and maybe even some outside help, almost anyone can reduce their debts. The first step in getting out of debt is to stop borrowing. To do that, you have to stop spending more money than you earn. Keep one low-interest credit card for emergencies, and lock it away in a safe place. Cut up the others. Then make a budget that reflects your real expenses, and excludes any unnecessary spending. If you need help developing a plan consider contacting a non-profit credit counseling agency.

TIPS:

• Make a realistic budget. Write down how much money you make and how much you spend. Writing down all your expenses – even those that may seem minor, like that morning cup of coffee from the corner store – will help you see your spending patterns and identify those areas where you can start to cut back;
• Set a monthly debt payment goal. Figure out the most you can afford to pay each month to reduce your debts and make those payments without fail;
• Contact your creditors. Contact your creditors immediately if you are having problems and try to work out a modified payment plan so your payments are manageable. Don’t wait until your accounts have been turned over to a debt collector.

TOOLS:

• Taking control of your debt. If bills are piling up, or messages from debt collectors are clogging your answering machine, find ways to get your debt load under better control;
• Choosing a credit counseling agency. Help is available to assist you in managing your money and sticking to your budget. Find the help you need to be “financially fit;"
• Signup for a free online money management class. Help in managing your money is easily available through free online financial education programs.

TRAPS:

• Splurging. Stick to your budget, even after you’ve paid off your debt. Don’t give in to the temptation to start over-spending, or you’ll find yourself in the same financial cycle;
• Using multiple credit cards. Never use more than one credit card. Even if you keep the balance low on each of them, those interest fees and penalties will pile up.

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