Dealing with Debt

Getting into debt is easy. Getting out of it is less so, but it can be done. For most of us in the 21st century, debt is a way of life. In fact, it's becoming increasingly easy to rack up debts in more then one form. Most people now have at least one credit card and often a number of loans.
These days, penalties aren't as brutal. (we may have a greater tolerance for the penalties). However, the emotional toll of overwhelming debt can create a personal prison equally painful.
According to the Federal Reserve, consumer debt has been hovering over $2 trillion during the past few years. For each household with one credit card, the average total debt is approximately $23,000 per household, with credit card debt alone at a staggering $9,000.
Consumer debt has increased as jobs have decreased. Americans may be unemployed, but that doesn't stop them from spending. Apparently, when unemployment gets tough, the tough go shopping. Personal savings has dropped to 0 percent of after-tax income. Not surprisingly, credit card delinquencies are on the rise.
If you want to buckle down the spending belt, experts agree on tried and true measures for viewing the light at the end of debt's tunnel.
Step one: Just say no. The first step to a debt-free existence is to stop accruing more debt. Temptation is the devil's playground. In order to resist a chronic descent into debtor's Hades, you often have to cut up your cards.
Step two: Track your daily spending for 30 days and compare it to your income. If your expenses exceed your income, you'll need to either cut back your spending or increase your earnings in order to get out of debt permanently. Once you have these numbers, you can develop a spending plan consistent with your cash flow.
Step three: Consolidate your debts into one account. Choose a low-interest credit card. Cutting your interest will enable you to pay off your principal more quickly.
Step four: Begin a savings plan. Even if it's a small amount, it's important to get into the habit. Replace your old pattern of getting deeper into debt with a new pattern of saving to prevent it.
Once you've paid off or consolidated debt, congratulate yourself…and make sure you don't fall back into old habits. Get used to using cash for all purchases, and try to limit your credit card use. It's okay to want the better things in life but if you learn to live within your means, the happiness and peace of mind you'll acquire will be worth more than all the debt in the world. You may discover that BMW can also mean Becoming Money Wise.
At First Source Federal Credit Union, we have a vested interest in your financial success. It is our goal to ensure that success through our full-service financial offerings and outstanding personal service. We invite you to learn the Value of Membership with First Source. Stop by any First Source branch, call 735.8571, or visit us online at www.fsource.org and let us help you get started.