Are you Drowning in Debt?

Written By Ellise Walsh

Tue 3/29/2005 11:04 AM

It is no secret that most people have too much consumer debt. It is all too easy to just sign your name on the dotted line and run that credit card up to the max. Unfortunately, many users of credit cards seem to forget that eventually the bill comes due, and they may be in for a rude surprise when it does. Credit card interest rates are notoriously high, even for consumers with good credit. Where a secured loan from your bank or credit union might cost you 8% or 9%, interest rates on typically unsecured credit card loans can be 18% or even higher.

At interest rates like that, it could take you decades to pay off even a small balance if you only pay the minimum balance due each month. Add that to the extremely high late fees and over limit fees that credit card companies often charge, and you can see how easy it is for many people to begin drowning in debt.

The most basic tool in getting a handle on your debt and eventually eliminating it altogether is to make a monthly budget and stick to it month in and month out. The family budget is the most basic form of financial planning, and I am always shocked by the number of people who do not take the time and the effort required to create this simple financial document.

Making a budget will go a long way toward getting a handle on your spending and lowering your debt. Write down every penny you spend, from that $2 cup of coffee each morning to that $20 tank of gas to your monthly mortgage payment. Seeing your spending in black and white can be a real eye opener, and you may instantly see simple and painless ways to tighten your belt and save yourself lots of money.

Just tightening your budget a little bit can provide you with extra money to pay down your debt. Paying extra on your credit card bills can go a long way toward retiring your debt. Of course after your debt is paid off, you will have to make a concerted effort to not run up any more debt. Cut up those credit cards and keep one with a low credit limit for emergencies only. Use it only when absolutely necessary and always pay it off every month.

It is always difficult to save money, and getting yourself out of debt can be difficult. It is not beyond your ability, however. Getting a handle on debt can be done with just a little bit of advance planning and financial know how.