May 2008: Are You In Debt?
This month's featured e-Wealth Coach is Gail Cunningham. Gail has worked for credit counseling organizations for 21 years and currently serves as the senior director of public relations for the National Foundation for Credit Counseling (NFCC).
People often ask me how they can tell if they’re in debt. My standard answer is, “If it feels like it, you probably are.” In this email, I’ll walk you through how to determine whether your debt is out of control and provide advice for getting out of debt.
Debt is a dark cloud that follows you around. It makes you fearful to answer the phone, worrying that it might be a bill collector on the other end of the line. You’re afraid to go to the mailbox. You’re not as good a spouse, parent or employee when debt issues are occupying your thoughts.
Consider the following when deciding if your debt level is fine or out of control:
- Do you argue about money at home? Court records show that financial problems are a leading cause of divorce.
- Do you hide purchases so that your spouse doesn’t know about them? In the industry, we call this financial infidelity.
- Do you have savings? If you’re living without a savings account, you are flying without a safety net.
- Do you charge things that you used to pay cash for, even the smallest purchases? This signals that you don’t have the ability to pay cash.
- Do you make only the minimum payment each month on your credit cards? If so, you’re the credit card company’s dream customer. You’re their annuity.
- Do you rob Peter to pay Paul? “Can I pay my Visa with my Master Card?” is only funny on a bumper sticker.
- Do you use balance transfers to obtain a lower interest rate, and since the rate is so low, continue charging? Moving money around isn’t getting you out of debt.
- Do you open new lines of credit when you near your credit limit on existing cards? This signals you’re living off of credit, and the last thing you need is another card.
- Do you skip payments or pay your bills late each month? If you’re paying late fees, you’re throwing good money out the window. Get organized, move your due dates, set up automatic bill paying, do whatever it takes to avoid this penalty.
- The place to start is by seeing what you owe in black and white. Whether you stare at these hard, cold facts on a tablet or on a computer screen isn’t important, but it is critical that you force yourself to own up to the amount of debt you’re carrying.
- Next, vow to do something about it. A willingness to change, and a commitment to follow through, is critical to the success of your plan.
- When you’re in a financial hole, stop digging. Stop charging and start paying with cash or a debit card. When you run out of money, stop spending. Yes, you can do this. It may not feel like it, but you can. And if you can’t, you’re in worse shape than you thought.
- Since every penny counts, you need to know where every penny is spent. Start tracking your spending. Recording the big-ticket items like rent and car payments is easy. It’s the little money that is unaccounted for that wrecks budgets. Therefore, commit to writing down every purchase every day for a month. This puts you in control. When you see your actual spending in writing, just like when you saw your debt obligations in writing, it brings a sense of reality to the situation.
National Foundation for Credit Counseling
