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Top Five Debt Reduction Tips
The holiday season is very stressful and many point to gift buying and other holiday expenditures as the main source of this stress. Smart budgeting skills are a good habit to form at any time, but a new year can give one the opportunity to put their financial mistakes in the past and start anew.
Consumer Credit Counseling Service of Northeastern Iowa offers these five simple steps to get back on your feet after the holiday shopping season and start 2007 on a positive note.
Begin with a budget – Write a list of regular monthly expenses (car payment, utilities, groceries, etc.) and total them up. Subtract this amount from total monthly take home pay. The amount remaining should be a positive number. Also, write down due dates for monthly bills, if you are paid on a bi-weekly basis you can plan ahead for which bills will be paid in each pay period.
Budget money into savings – If possible, put aside a sum of money every pay period for unexpected emergencies (the furnace breaks, car repairs) and planned future expenses (remodeling the bathroom, car registration renewal). Everyday purchases should only be made using cash on hand (checks, ATM or debit card).
Limit credit card use – Credit cards are tempting to use, but often trap consumers into a debt cycle that is very hard to break. Think of a credit card as a loan, and it must be paid back with interest. In the end credit cards only increases debt.
Pay bills on time – Paying on time avoids late charges and higher interest rates. Late fees and high interest rates work against you in lowering your debt. This habit also helps raise your credit score, which saves you money when applying for a home mortgage or other loan.
Pay bills strategically – Use any extra money to pay off small accounts first. When the small account is paid, rotate the extra money and money from the smaller paid account to the next larger account.
Following the tips above can help consumers get out of credit card debts in 2 to 10 years, compared to only making the minimum payments on credit cards that can take a lifetime.
Should consumers need additional help, in many cases Consumer Credit Counseling Service of Northeastern Iowa is able to get consumers out of debt in 2 to 5 years, about half the time the average consumer will take on their own.
Consumer Credit Counseling Service has many offices located throughout Iowa; click here for a listing of offices near you.
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CCCS of Northeastern Iowa CEO, Karen Atwood, and CCCS Mason City office manager, Kathye Gaines, met with Iowa Senator Tom Harkin recently in Washington D.C. Atwood and Gaines were in the nation’s capital for the annual National Foundation for Credit Counseling Conference. Besides learning more about the new bankruptcy law and the latest on |
| credit counseling, they also met with members of Iowa’s congressional delegation including Harkin. Meetings like this help CCCS of Northeastern Iowa communicate the needs of its clients to lawmakers who can help |
Keep track of your bills.
Getting organized will go a long way toward helping you get control. Don’t make organization complicated. Designate a file cabinet for bills and financial statements. Make separate files for bank statements, tax documents, credit card bills, medical receipts, mortgage statements and other records.
Create a monthly budget.
It’s important to know your monthly income and your monthly expenses. Those numbers will provide a roadmap for handling your debt. Go to the Set a Budget section on our Web site for detailed help.
Prioritize your expenses.
After looking at your expenses, prioritize them. You have to keep some of your expenses but others are based more on wants than needs. Set spending limits.
Look for ways to reduce daily spending such as bringing your lunch instead of buying it.
Try to pay down your high interest credit cards and loans. Save as much as you can.
Recognize the warning signs of debt trouble.
Those include:
- Being behind on the basics such as your mortgage, rent or utility bills
- Using credit cards to buy items you would normally purchase with cash, such as groceries
- Skipping some debt payments to make others
- Receiving overdue notices or getting calls from debt collectors
- Using more than 25% of your take-home pay for credit card debt
Get help if you need it.
You can call your creditors or get credit counseling. Our counselors at Consumer Credit Counseling Service of Northeastern Iowa are certified. They have solutions because of their experience. Remember, though, you are ultimately responsible for your finances.
We’re well into 2006 now but can still make the most out of the promising year yet to come. We’re here to help you accomplish that goal by managing money more effectively. |
