What’s the Deal with Debt?
There is no doubt that debt is a major problem for many Americans. Seniors especially are at risk, because many of them are on fixed incomes. They often find themselves carrying an average of over four thousand dollars in credit-card debt. When the accumulating interest is added each month, even if they pay the minimum payment in a timely manner, their debt may rise, especially if they find themselves adding new charges.
College graduates are another group that too often falls into trouble with credit-card debts that average around two thousand two huindred dollars. This is on top of their student loans, which themselves average about forty thousand dollars. If the current trends towards buying now and paying alter continue, then the number of people who find that they can’t keep up will only grow.
Even the average consumer who doesn’t fall into one of the above high risk categories is a risk from debt trouble. How do you know if you need help? There are a few key signs. If you find that you are at or near the limit of your credit line each month, you should be concerned about your credit spending. If you find that you can only make the minimum payments on your credit cards each month, then it is definitely time to be worried. If more than fifteen percent of your take-home pay goes towards paying credit card debt payments, it’s time to make a change. If you find that you have to skip some bill payments in order to make others, then it may even be time to find a way to consolidate your debt.
Debt consolidation can make sense if you can do it in such a way that you are not merely replacing one bad credit habit with another. In order to determine a method that will actually help you to eliminate your debt, your best bet is to contact a non-profit credit counseling agency.
If you contact a credit counselor you should receive good advice that leads to an overall improvement of your payment history and a lessening – or even elimination – of your debt. This can only help your credit score as well as your overall financial health. In turn, this can even help your mental and emotional health as well, because is nothing more stressful than worrying each month about how to juggle your bills. Be cautious about any debt counseling or management plan that asks for fees up front, however. While they may promise to wipe out your debt quickly, their real goal is usually just to line their own pockets quickly.
True credit counseling is about financial education. It will help you to learn how to develop a budget and good saving practices. A debt-management plan, on the other hand, is an agreement with multiple creditors for repaying your debts, which is then accepted by creditors and administered by a credit-counseling agency. A DMP is only one option that a consumer should be presented with as a solution, and in most cases it should be used as a last resort.
The best way to start improving your financial health and cutting back on your debt is to create a budget and stick to it. First, you need to figure out how much you owe and to whom. Make one list of overall debt and another for monthly payments. Your goal will be to pay more than the monthly minimum credit card payments as often as possible, focusing first on the accounts with higher interest rates. This will not benefit you, however, unless you also pay all of your other bills in a timely manner. In order to accomplish this, you will need to cut back – or even eliminate – new spending that is not absolutely essential.
If you are serious about improving your financial situation, then there is no time like the present to get started. Figure out your monthly expenses, overall debt, and come up with a reasonable budget. If you don’t think that you can do this on your own, then seek help from a reputable debt counselor today.