Economic Changes: Credit and Debt

Although not directly an environmental subject, debt is something that has made a huge impression in our current economic situation. A little more than a year ago, commercials on TV and radio were all about private companies wanting to give you money, but today, those ads have almost disappeared. They have been replaced with companies wanting to help you consolidate and get rid of your overwhelming debt. Not only are Americans now being faced with the growing cost of heating fuel, gasoline, and food (the topic of my next entry), but they are also having to deal with their existing and growing debt. And it doesn’t matter if you owe a credit card company a couple hundred dollars, or a private institution thousands, it can be an extremly stressful and challenging issue to face.

At 23, I have come to the realization that it is near impossible to not live without some debt in your life. It really is a situation of “if it’s not one thing, it’s another.” Credit cards, student loans, mortgages, personal, medical, and automotive loans, these are only a few of the sources of debt that everyone in this country is facing. It’s impact on the current economy is huge, and even a snippet from VPR this this past morning morning says that some analysts (sorry for the vagueness, it was only caught on my way back from grabbing my coffee) are saying that the credit problem we see today will reverberate through the economy for at least another 2 to 4 years. This makes sense even to me, because if you have substantial debt, you know that you cannot get out of it in a matter of months, let alone a year.

I face the issue of growing debt every day. For me, it’s two credit card bills and a massive student loan. Does it stress me out? Yes. Does it at times scare and overwhelm me? Yes. But do I feel as though I have a healthy control over it? Yes. Can everyone get control of their debt? Yes! Let me share some of my strategies.

Let me begin with a disclaimer that I am by no means an expert in money management, and the suggestions I make are only based on what I have personally experienced. So what works for me, may not work for you, and that’s okay. But my goal for anyone would be to walk away from this post with a renewed sense of confidence and the motivation to try to get a firm grasp on their debt.

My Situation:  Between my husband and I, we have two credit cards. Surprisingly, these really are not much of an issue. We have since paid his off and now use it only for purchasing items online. Mine is a little more substantial, but that’s because I have used it for large purchases in the past- i.e. pay for our honeymoon reservations last year, and most recently cover the cost of taking a Microbiology class at a local community college. So although we have some credit card debt, it’s not so much of a problem. What is a problem are my student loans. $60,000 is a daunting number for someone my age who stepped out of college only a year ago. And with a number that big, I was shocked to find that I rack up about $13.00 in debt every DAY just from interest. So by the end of the month, the bill I’m paying is about 96% interest and 4% payment on the actual figure. And this is on a 30 year pay-off rate because at this point in my life, that’s all I can comfortably afford to do. Despite figures showing that kids who go to college end up with better job opportunities, it doesn’t always mean those job opportunities are always higher paying. After all, I wouldn’t be so stressed out if that was my case!

But so far, so good. I have been able to retain good credit month after month *knock on wood* by trying to keep a level head about it all. I know some people are better off than me in debt situations, and I know many more are worse off too. But here is where I will post my recommendations for someone in need of debt control advice. Again, remind yourself of my disclaimer above.

Five Suggestions for Getting Debt Under Control

1. Take time to ask for help and sort everything out. You may be just starting out or way over your head right now, but either way, before you do anything else, you need to address your situation. Figure out who you owe and how much you owe. I don’t suggest adding it all together if you can help it, just because that figure may scare you a little too much. Instead, just look at each debt individually. Figure out how the costs are going to fit into your budget, get organized and keep track of everything in a folder or three ring binder, and if you don’t know where to start, ask someone for help. All too often we find ourselves acting overly stubborn, thinking thoughts like “if I can’t figure this out, there’s something wrong we me”- I’ve been there plenty of times. But there is nothing wrong with asking for help. Use whatever resources you have available to get a grasp on your situation. Personally, I have asked my father time and time again to help me to understand something or to help me figure things out because he has many more years of experience with these kinds of things. He’s great at managing money and sorting out budgets, and although sometimes he’s a little too extreme for me, he always has a helpful suggestion. If you know of someone who can help, whether it’s family, friends, or maybe even a professional (I know lots of independent financial organizations offer help for little to nothing), go ask for their help! You’ll be surprised how much you can take away from knowledgeable people who have been in your situation before.

2. Make a plan. After you has sorted everything out, sit down and figure out how you are going to pay your debt off. Maybe you’ll decided to pay a little on everything, or a lot on one but not the rest. Figure out how long you would like to have your debt paid off, then plan from their. Whatever you choose to do, make sure you have a solid plan of attack.

3. Stop spending. Easier said than done! The problem with something like credit card debt is that it can be really hard to break yourself of your spending habit. But you can do it! You don’t have to quit cold turkey, but instead slowly reduce the amount that you spend. Although everyone would ideally tell you to stop spending all together, like dieting, the key to success is gradual reduction.

4. Pay more than the minimum payment, if possible. This is the simplest of all tips, and it’s one you hear more often than you think. Credit companies always give you a minimum payment due on their bills, but if you look closely at it, and do a little math, you’ll realize that their minimum payment will be just enough to cover the past month’s interest, maybe only a little more. So if you are only paying the minimum payment each month, you’re never going to pay off your actual debt- instead you’ll be wasting your money on charges you never made. So ALWAYS pay more than the minimum payment due, even if it’s just a dollar more. This is a situation where every little bit counts! So if you can pay another $20 or more on your debt bill each month, do it! It’ll help you to pay your debts off faster with less money spent on interest alone!

5. Talk to your creditors. It may sound a little odd, maybe even foolish, but creditors are people too, believe it or not. As those “overdue payments” tell you, they are concerned about getting their money back, so give them a call and talk to them, especially if you are in good standing. Say for example that you have been with your credit card company for three years, you have never missed a payment, and have always paid more than the minimum balance due. To them, you are a golden customer they want to keep! So if you notice things are getting a little hard, call them out, plead your case and ask if they would be willing to do something like lowering your interest a half a point, or if that’s a little much, if there are any program options available that might help you out. And if you still don’t think they are going to help, dicker with them a bit. Tell them that you have been considering transferring your balance to a new company’s card. Again, another cliche, this is a situation where it doesn’t hurt to try!

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5 thoughts on “Economic Changes: Credit and Debt

  1. I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.

    Tim Ramsey

  2. Debt is a big problem! Our finances at every level from families to government are saddled with a burden that is becoming increasingly over-bearing. Your strategies are a great reminder such as stop spending. It will be tough as you say, but like any addiction it must be quenched because it is destructive. Debt might be everywhere, but it doesn’t have to linger forever. Once we commit to getting rid of it, one will find they can live without it.

    God Bless!

    http://www.beatingdebt.wordpress.com

  3. There are various debt consolidation programs, which gives you a lot of options. You could either select a paid service or go for the many free services available. Thanks for the article!

  4. Pingback: making money

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