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Credit Wise The Burden of Debt Last night as I sat watching the news, one
of the messages that they flashed across the bottom of the screen said, “A
majority of Americans think that personal debt is a growing problem.” In
this case, the majority of Americans are absolutely right. According to
the Federal Reserve, Americans owed $805 billion dollars in revolving debt in
2005. Revolving debt does NOT include mortgages or car payments. Even
though the statistics are staggering, I don’t know that they are really doing
anything to influence our spending habits. All signs point to the fact that even
though the cost of living is increasing so is credit card debt. It makes me
wonder if more Americans are charging necessary items on credit cards just to
make it month to month.
More...
As a credit counselor for nearly 9 years
now, I have seen clients in every financial situation. I can tell you that
living in debt can take a real toll on your life. Financial problems are cited
as the #1 contributor to divorce. (Editor's note: And they have been for
decades!) Debt stress has also been found to affect job performance,
mental health, family relationships, and overall well-being. Unfortunately,
financial stress has also driven numerous people to suicide. The problem isn’t
getting better. Apparently, it is getting worse. Who are these people that collectively owe $805 billion dollars and pay over millions of dollars per month in finance charges? They are the unemployed man trying to support his family through any means necessary until that job comes through. They are the woman with a cancer diagnosis that needs the credit cards to pay for her 15 prescriptions because insurance doesn’t cover it all. They are the single mother who is supposed to get child support and doesn’t. They are the college student that is using credit cards to make it on a student’s salary, hoping to get that good paying job after graduation. They are the dad who wants his kids to have it better than he did. Yes, sometimes, they are the couple that
appear wealthy to outsiders but use credit cards to keep up with the neighbors.
Sometimes they are the middle class couple who have gotten into the habit of
using credit cards to allow them to live beyond their means. Once they got into
the habit of buying things that they wanted but could not afford, they did not
know how to stop. So, why do we live under the stress of debt
when we don’t have to live that way? Many of us don’t know any other way to
live. The truth is that even though living in debt can be very stressful, many
people just kind of get used to it. If you are walking around carrying the deep
dark secret that you are in debt way over your head, please know that you
don’t have to live that way. There are ways to change your life so that you
are in control of your finances instead of the other way around. If you are
living debt-free (good for you!) chances are that you know someone who isn’t.
Spread the word. The only way that we are going to solve the problem of debt in
our nation is to work together. Many people are afraid of changing their
spending habits because they don’t want to feel like they are suffering. The
truth is that most people that have significant debt are already suffering under
that burden. Refusing to keep adding to your debt certainly isn’t going to
hurt you. When you start to make smarter financial choices and actually work
your way out of debt, it isn’t suffering-it’s liberating. The first thing
you need to take charge of your life is a plan. So, tackle your fear of the
unknown and get to work. Here are some relatively painless steps to turn your
finances around and get out from under the burden of debt. Pay yourself first:
Yes, even if you have debt, you need to have something in savings. I don’t
care if it is $5.00 per week. If that’s all you can afford, start there.
Getting into the habit of saving money will make it easier to leave your money
there when you are able to contribute more. The root reason that most people are
in debt is poor planning. They didn’t have any money in savings so when
something went wrong (the dog/cat/child/spouse got sick, the roof leaked, the
tire went flat, the air conditioner quit, etc.) there was nothing to do but
charge it. So, plan for something to go wrong and put something in savings.
Then, leave it there. Set some goals: Decide
what you’d like to accomplish. How much do you want to have in savings in one
year? When can you be debt-free? Do you want to make any major purchases such as
a home or car? Then, decide how to make it happen. Financial success doesn’t
typically happen accidentally. If you are going to achieve your goals, you’re
going to have to do it on purpose. Develop a budget:
Some people think of “budget” as a bad word. Call it a spending plan, if you
wish. Write down how much money you have coming in and how much you have going
out. If you need to cut back, do it. If you’re like most Americans, you may
have no idea where that $20.00 goes when you leave the ATM. If not, track your
spending. Find out what you are spending and come up with some compromises. Add up how much you owe:
This may be scary but it is important. Then, develop a plan to pay it back.
Experts will give different recommendations for how to best repay it. Some will
say to pay the highest interest accounts. Some will say to pay the smallest
balance off first. Whatever you decide, pay more than the minimum and as
accounts pay off, increase payments to others. By this method, most people can
be debt-free in 5 years or less. Get professional help:
If your eyes start to glaze over when you look at those tiny lines on budget
forms, many credit counseling agencies offer free or low-cost credit counseling
where a real live expert will help you develop your very own budget and debt
repayment plan. To find a reputable office near you, contact the National
Foundation for Credit Counseling at www.nfcc.org
One common complaint that I hear is “But,
it will take me 5 years to get out of debt!” I understand that it may feel
like forever. But, how long did it take you to get into debt? Unless you went on
a wild
* * *
Copyright © 2006 by Jennifer Delcamp. All rights reserved. Want more money-saving tips? Get a FREE Subscription to our monthly newsletter!
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