By Jessica Malitoris on November 1, 2010
.jpg.aspx) Debt, especially credit card debt, is a major problem in America today. Unfortunately, it is becoming even more difficult to pay off debt, which is particularly problematic because debt is frequently the result of exceptional medical bills or even simply normal expenses during a period of unemployment. For those who are in debt for these reasons rather than for frequent mall trips, the result is the same: any kind of debt will impact your credit score, preventing you from making large and important purchases or receiving loans in the future. It is therefore important to try to keep on top of your debt as much as possible. There are a few things you can do if you are already in debt, and a few things to prevent sticky situations in the future.
Whether you’re going through rough economic times or simply tend to overspend, it is important to get credit card use under control. You can easily do this by using cash to pay for smaller purchases, such as lunch or items at the drugstore. This way you remind yourself how much money you are actually spending—it isn’t simply a number on a piece of paper.
Creating a monthly budget can go along with the first step. Compare how much money your household makes per month, and how much money your household spends each month. If you find there are a few unnecessary expenses that are stretching your resources beyond what you make each month, try cutting back. Leave room to set aside some money for savings, and if you find you still have money left over, you can put it towards paying off outstanding debt.
At the same time, you want to be reducing the number of credit cards you have. Maybe stick to one card for medical bills, one for weekly groceries, and an extra for “special purchases”—new clothes as needed. Cut back on the number of credit cards you have and you will cut back on the number of bills. It is especially important to remember that using a new credit card to pay off debt on an old card just keeps the cycle going. Keep it simple.
Finally, always read the fine print when you are about to take out a loan. Whether it is on a car, a house, or a new business, make sure you know the terms of your agreement very well. Don’t let yourself be surprised by a jump in the interest rate, and be very careful with deals that advertise “0%APR”—make sure you know what happens when the time limit is up!
Resources Used:
"Consumer Debt: Are Credit Cards Bankrupting Americans?." Hearing Before the Subcommitte on Commercial and Administrative Law of the Committee of the Judiciary. Washington, DC, U.S. Government Printing Office. 2009.
Plate, Shannon. Degunking Your Personal Finances. Paraglyph Press: Scottsdale, Ariz., 2005.
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