 Slam
the Door on Credit Card Debt
by: ARA Content
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.
About The Author
Courtesy ARA Content, www.ARAcontent.com; e-mail: info@ARAcontent.com
EDITOR'S NOTE: For more information contact Maclaren Latta, Carmichael
Lynch Spong, (612) 375-8570, mlatta@clynch.com or Stephen Dupont, Carmichael
Lynch Spong, (612) 375-8525, sdupont@clynch.com.
Securities available through PrimeVest Financial Services, Inc., Member
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