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The Burden of Debt

Credit Wise (featured column)
by Jennifer Wallis

Last night as I sat watching the news, one of the messages that they flashed across the bottom of the screen said, “A majority of Americans think that personal debt is a growing problem.”  In this case, they are absolutely right.

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According to the Federal Reserve, Americans owed $805 billion dollars in revolving debt in 2005. Revolving debt does NOT include mortgages or car payments.  Even though the statistics are staggering, I don’t know that they are really doing anything to influence our spending habits. All signs point to the fact that even though the cost of living is increasing so is credit card debt. It makes me wonder if more Americans are charging necessary items on credit cards just to make it month to month.

As a credit counselor for nearly 9 years now, I have seen clients in every financial situation. I can tell you that living in debt can take a real toll on your life. Financial problems are cited as the #1 contributor to divorce. (Editor's note: And they have been for decades!)  Debt stress has also been found to affect job performance, mental health, family relationships, and overall well-being. Unfortunately, financial stress has also driven numerous people to suicide. The problem isn’t getting better. Apparently, it is getting worse.

Who are these people that collectively owe $805 billion dollars and pay over millions of dollars per month in finance charges? They are the unemployed man trying to support his family through any means necessary until that job comes through. They are the woman with a cancer diagnosis that needs the credit cards to pay for her 15 prescriptions because insurance doesn’t cover it all. They are the single mother who is supposed to get child support and doesn’t. They are the college student that is using credit cards to make it on a student’s salary, hoping to get that good paying job after graduation. They are the dad who wants his kids to have it better than he did.

Yes, sometimes, they are the couple that appear wealthy to outsiders but use credit cards to keep up with the neighbors. Sometimes they are the middle class couple who have gotten into the habit of using credit cards to allow them to live beyond their means. Once they got into the habit of buying things that they wanted but could not afford, they did not know how to stop.

So, why do we live under the stress of debt when we don’t have to live that way? Many of us don’t know any other way to live. The truth is that even though living in debt can be very stressful, many people just kind of get used to it. If you are walking around carrying the deep dark secret that you are in debt way over your head, please know that you don’t have to live that way. There are ways to change your life so that you are in control of your finances instead of the other way around. If you are living debt-free (good for you!) chances are that you know someone who isn’t. Spread the word. The only way that we are going to solve the problem of debt in our nation is to work together.

Many people are afraid of changing their spending habits because they don’t want to feel like they are suffering. The truth is that most people that have significant debt are already suffering under that burden. Refusing to keep adding to your debt certainly isn’t going to hurt you. When you start to make smarter financial choices and actually work your way out of debt, it isn’t suffering-it’s liberating. The first thing you need to take charge of your life is a plan. So, tackle your fear of the unknown and get to work.

Here are some relatively painless steps to turn your finances around and get out from under the burden of debt:

Pay yourself first:  

Yes, even if you have debt, you need to have something in savings. I don’t care if it is $5.00 per week. If that’s all you can afford, start there. Getting into the habit of saving money will make it easier to leave your money there when you are able to contribute more. The root reason that most people are in debt is poor planning. They didn’t have any money in savings so when something went wrong (the dog/cat/child/spouse got sick, the roof leaked, the tire went flat, the air conditioner quit, etc.) there was nothing to do but charge it. So, plan for something to go wrong and put something in savings. Then, leave it there.

Stop making the problem worse:  

If you are digging a hole and someone else is shoveling dirt back into it, how far do you think you’ll get? If you have debt, stop charging/borrowing today. You can do it. Leave the credit cards at home, freeze them in a block of ice, give them to a trusted friend to hold or make a pretty plastic collage out of them. Do whatever it takes to stop getting yourself further into debt.

Set some goals:  

Decide what you’d like to accomplish. How much do you want to have in savings in one year? When can you be debt-free? Do you want to make any major purchases such as a home or car? Then, decide how to make it happen. Financial success doesn’t typically happen accidentally. If you are going to achieve your goals, you’re going to have to do it on purpose.

Develop a budget:  

Some people think of “budget” as a bad word. Call it a spending plan, if you wish. Write down how much money you have coming in and how much you have going out. If you need to cut back, do it. If you’re like most Americans, you may have no idea where that $20.00 goes when you leave the ATM. If not, track your spending. Find out what you are spending and come up with some compromises.

Add up how much you owe:  

This may be scary but it is important. Then, develop a plan to pay it back. Experts will give different recommendations for how to best repay it. Some will say to pay the highest interest accounts. Some will say to pay the smallest balance off first. Whatever you decide, pay more than the minimum and as accounts pay off, increase payments to others. By this method, most people can be debt-free in 5 years or less.

Get professional help:  

If your eyes start to glaze over when you look at those tiny lines on budget forms, many credit counseling agencies offer free or low-cost credit counseling where a real live expert will help you develop your very own budget and debt repayment plan. To find a reputable office near you, contact the National Foundation for Credit Counseling at www.nfcc.org.

One common complaint that I hear is “But, it will take me 5 years to get out of debt!” I understand that it may feel like forever. But, how long did it take you to get into debt? Unless you went on a wild Paris Hilton-esque shopping spree, I’m going to guess that it took years to wind up in debt. If you start today, you can be debt-free in 5 years or less.

The alternative is to procrastinate on fixing the problem and still being in debt 5 years from now. Now, you don’t want that do you? Start today and see just how liberating it is to make financial choices that you can feel good about. I promise you that once you get a taste of how good it feels to have money in the bank, you will never want to go back.

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Copyright © 2006 by Jennifer Delcamp. All rights reserved.

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