Getting Out of Debt Doesn’t Happen by Chance

Monday, March 17 at 10:25 AM
Category: Personal Finance

We hate to break the news to you, especially since today is St. Patrick’s Day, but there is no leprechaun who will lead you to a pot of gold to help you get out of debt. For many people, using credit is a normal part of handling their finances. For others, using credit can lead to uncontrolled spending, anxiety, unpleasantness or even bankruptcy. If you want (or need) to reduce your debt, you’re going to need more than just a four-leaf clover. Here are some ideas that may help.

Develop Debt Strategy 
Borrow money for things that provide long-term and lasting value. Borrowing for college costs is probably good while charging another extravagant vacation on your credit card is probably not the best use of debt.

Credit Cards
Decide on a credit card strategy. Remember every time you charge something on a credit card, you will have to pay for it. Don’t charge things you can’t afford. Try to pay your entire balance each month to avoid interest and be sure to make the payments promptly to avoid any late payment fees.

Choose a credit card that offers the right combination of fees, rates and benefits. If you pay every credit card bill in full and don't incur any finance charges, it may be ok to have a card with a high interest rate but offers rewards for use (like airline miles or money back) or has no annual fee. If you carry over balances and pay finance charges, then the interest rate becomes more important.

If credit cards are too tempting, then get rid of them. Using checks or a debit card can eliminate the risk of buying things when you don’t have money in your account to pay for them. Cash works too.

Examine the Rates
Eliminate high cost borrowing. Determine if you can convert high interest rate debt to another lower rate. If you are paying high interest rates on credit card balances, then find a card with a lower rate, but watch out for "teaser" rates.

Get Help
What if you can't pay your bills? This is when you should get help. First, stop incurring more debt - quit using or destroy your credit cards. Then, contact your creditors to work out a payment schedule. Explain your situation and that you want to pay what you owe. They may be able to help. If not, at least you have tried.

Get professional help if you need it. There are several non-profit organizations, such as Consumer Credit Counseling, that help individuals when all else fails. They can help you create a plan to work your way out of debt. Their service is free and has helped thousands. Be very wary of organizations that offer to fix your credit rating or want you to pay a fee to get you out of debt easily.

With planning and discipline you can add some green to your wallet, and not just on St. Patrick’s Day. Then you’ll be sharing the good news and saying, “Kiss me, I’m debt free.”

Tags: Credit Cards, Debt, Financial Education
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