Slam
the Door on Debt
IHateFinancialPlanning.com
offers ten tips to help you get out and stay out
(ARA) - According to American
Consumer Credit Counseling, Inc., the average balance on a credit card is
$7,000, offering an average interest rate of 18.9 percent.
Additional statistics show
that the average household has 10 credit cards and, not surprisingly, over
half of those households report having trouble paying their minimum monthly
payments.
Common indicators of a debt
problem include not knowing the state of your personal finances; not knowing
how much you owe or what interest rate you are paying; missing payments;
having poor savings habits; using one credit card to pay another, or living
paycheck-to-paycheck.
For many Americans, the
statistics and debt problem indicators hit even closer to home with the
conclusion of the holiday shopping season and the onset of the ever-dreaded
tax season. Facing debts is one of the major barriers for people in dealing
with their personal finances.
One organization that
understands the problems associated with debt management is
IHateFinancialPlanning.com (www.IHateFinancialPlanning.com), a Web site
intended for the 3 out of 4 Americans who hate financial planning. The site
offers helpful tips for eliminating debt and staying out of debt in the
future.
"Millions of Americans
love the instant gratification of using their credit card and hate thinking
about the serious consequences of accumulating debt," says Randy
Schuldt, a vice president with IHateFinancialPlanning.com. "Debt can
paralyze people from moving forward. But, with a solid plan and the right
tools, paying off their credit cards and eliminating their debts can be
tolerable and even enjoyable."
Numerous options are
available for those who are struggling to shut the door on debt. Declaring
bankruptcy is not necessarily the best option. Sites such as
IHateFinancialPlanning.com provide advice, tools and resources for those
needing assistance. Visitors to the site also have the option of e-mailing
their questions and receiving a free answer from a professional with no
strings or sales pitches attached.
To help you get started on
the road to less debt and greater gratification, IHateFinancialPlanning.com
offers the following tips:
Put Yourself First
That's right! It sounds a bit
surprising, but according to Debtors Anonymous (www.debtorsanonymous.org),
it's critical to take care of yourself while eliminating debt. No, this
doesn't mean that you can go on a spending spree if you are feeling
depressed. Instead, get plenty of rest and eat well to keep energized while
focusing on your goal of being debt free.
Keep a Record and Prioritize
Keep track of every nickel
you spend for a month and record amounts spent in appropriate categories -
i.e. housing, transportation, food, clothes, entertainment, etc. It doesn't
have to be a fancy software program - just a pencil and a pad of paper will
suffice. At the end of the month, analyze where your money is going. Decide
if the items purchased are necessities or niceties. Be realistic. What
spending can you eliminate or reduce in order to reach your goal of being
debt free? Perhaps you can pack your lunch rather than eat out every day,
rent a movie rather than see the latest release, or scale down on your
clothing budget. Do you really need another tie or an additional pair of
black shoes?
List Your Debts
Create a list of your debts -
the amount you owe and the interest rate. Make the minimum payment each
month - but more importantly, make a commitment to pay off the debt with the
highest interest rate first by making an extra payment. After you've paid
off that debt, apply the amount you were paying on the old debt to your next
debt with the next highest interest rate. Don't reduce the total debt
payment amount just because one debt is paid off.
Create a Spending Plan
Once you have made a record
of how you spend your money and have concluded which expenses are necessary,
then you are ready to create a spending plan. Start by projecting how much
money you will spend in each category for the month. Change the amount if
your situation changes. Didn't expect to break your arm and dent your
vehicle's bumper in the same month? Make adjustments and move forward.
Create a new plan for each month. This is the best tool to stay in control
of your spending. Remember that some of these tips are appropriate for your
lifestyle, some of them are not. Personalize your plan and keep focused.
Cut Up and Cancel
Get rid of those credit
cards! Cut them up and cancel them. Be aware that when you try to cancel
your credit card, the company may offer you an extended line of credit or a
lower interest rate. Do not be tempted! It's not your glowing personality
that entices them to do business with you. If you can handle having one,
keep a credit card for emergency purposes (which doesn't include a
last-minute trip to the Bahamas to beat the winter blahs). Pay off that one
credit card each and every month - or else be back in the same shipwrecked
boat of debt. Minimum monthly payments are not acceptable.
Debit Not Credit
Love the feel of plastic
sliding through your fingers while making a purchase? Worried you will have
withdrawal? Use a debit card that immediately withdraws money from your
checking account. Experience the feeling of gratification knowing you've
paid for the item you just picked out.
Income-producing Investments
Use credit to purchase items
that give you some income-producing potential. There is such a thing as good
debt - a mortgage for a home, a loan for an education or the start of a new
business. Sorry, payments on an expensive new SUV don't count unless you
make a living as a chauffeur.
Credit is Not Income
If you apply for one of the
seven credit card applications that arrive annually in an average American's
mail, and receive a $5000 line of credit, don't consider it a raise. It's
not your money and you haven't earned it. You have simply been given the
opportunity to accumulate debt at the lender's benefit. Americans paid out
approximately $65 billion in interest last year alone. With the exception of
your mortgage, credit payments should never exceed 10 percent of your
income.
Shop Around and Be Smart
Take a look at other interest
rates. Be smart. Don't finance your car with a credit card if you can get a
car loan at a lower interest rate. If your current interest rate on your
credit card is 15 percent and another company is offering you 8 percent,
contact your credit card company and see if they will meet the competitor's
rate. If not, take advantage of offers to transfer your higher interest rate
cards to lower interest rate cards. It's worth the time to shop around while
you are lowering your debt.
Save, Save and Then Save Some
More
Start saving today. If your
credit card payment of $500 per month was eliminated and you were able to
invest that amount in a savings vehicle earning a 10 percent return, you
would save over $1 million in 30 years. That's real money in your piggy
bank.
Leave the Piggy Bank Alone
If you have already started a
401K plan or have a savings account, resist the temptation of using your
investments to pay off your debt. Take advantage of the good side of
interest - the compounding side - and keep your investments on track. Think
long-term, not short-term, while paying off your debts.
Courtesy of ARA Content,
www.aracontent.com, e-mail: info@aracontent.com
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