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Financial Regret? Step Up to a Debt Reduction Challenge in 2005
(ARA) - At a time when the average household owes approximately $9,000 in
credit card debt, one credit counselor is asking Americans to step up to a
debt-reduction challenge:
"If 2004 was your year of plastic, resolve to make 2005 the year of
green," says Michael McAuliffe, president of Family Credit Counseling
Service, a nationwide non-profit offering financial education and debt repayment
solutions.
McAuliffe is concerned about the amount of debt families are carrying. "At
an average interest rate of 18 percent, it can take more than 30 years to pay
down a $9,000 balance by making just the minimum payments, and cost two and a
half times the balance in interest," he says.
By resolving to get ahead of compound interest, Americans can more quickly save
money for vacations, education or other personal and family goals. And, says
McAuliffe, setting a financial resolution isn't just about the money. He points
out that the stress caused by debt can impact all areas of life, including
relationships and work. "Getting ahead of debt will reduce stress and help
you live a more satisfied life."
McAuliffe provides the following tips to pay down debt:
Have a plan
Track your family's spending to determine where all of your "extra"
money goes and create a detailed monthly budget. "Don't get nickeled and
dimed to death," says McAuliffe. "Analyze all of your expenses each
month and be sure you need and/or use all of the services you pay for."
Without a budget, you may not be able to see how much of your income can
realistically be applied to your outstanding debt. You would not want to get
caught in the cycle of paying too much to your creditors and wind up using your
credit cards for living expenses before your next payday. A Personal Budget
Guide can be downloaded at www.familycredit.org.
Review all credit card debt and interest rates
One way to pay down your debt is to make the minimum payments on all of your
cards and pay all excess income to the creditor with the highest interest rate.
Some creditors carry an annual interest rate as high as 35 percent. It could
make sense to pay more on that debt than on a card with a 12 percent rate. You
can determine your monthly debt payments by using a credit calculator like the
one at www.teachmeaboutcredit.org. Additionally, you may want to keep only a few
cards with the lowest interest rates open and switch other credit card balances
to them. Also, it never hurts to contact your creditors and ask for reduced
rates.
Save for major purchases
Resolve to hold off on major purchases, and instead save for future comfort and
unexpected expenses. If you put your money towards credit card payments instead
of unnecessary purchases, however tempting, you'll save thousands of dollars in
interest that could be spent on big-ticket items such as vacations and/or other
personal and family goals down the road. "Think of it as buying piece of
mind instead," says McAuliffe.
Don't think you can borrow your way out of debt
Stay away from payday loans, rent-to-own, cash advances and/or title loans. The
compound interest on these debts will wind up costing you too much in the long
run.
Most importantly, be patient. "Getting your finances under control does not
happen overnight and there is no sense in compromising your health by stressing
about it every day," says McAuliffe. "Make a commitment to becoming
debt-free and be vigilant about meeting your financial goals."
If debt problems are keeping you from enjoying the New Year, contact a
professional debt counselor at (800) 994-3328 or visit
www.teachmeaboutcredit.org.
Courtesy of ARA Content