Cash Flow/Wise Debt Management
Reducing debt takes commitment, patience
While employment rates and stock prices have been dropping,
one thing has kept going up in America: debt. The trend began
in the 1990s, when the rate of personal bankruptcy in the
country rose by nearly 70 percent, and it continues today.
Regardless of the cause of debt - the most common is misuse
of credit - there are steps you can take to manage and overcome
There is no quick fix — getting out of debt requires
time and effort
- Take control. Review your records to
determine levels of income and expenses. In one column,
list all reliable monthly income, such as salary, pension,
or unemployment payments; add average amounts for additional,
less consistent sources of money. In a second column, list
all expenses. Start with major costs, like mortgage or rent,
utilities, food, transportation, credit card payments, etc.
Remember to include expenses that happen other than monthly,
like property taxes and insurance. Refer to bank statements
and purchase receipts; don't overlook cash expenditures.
- Create a budget. Based on income and
expenses, set up a budget that allocates monthly amounts
for all categories of spending. Eliminate unnecessary costs:
eat at home rather than dine out; rent movies rather than
go to movie theaters; cancel cable television service. Develop
a plan to pay off credit cards, especially those with high
interest rates. It's often a good idea to include the entire
family in the budgeting process since it will define the
scope of their purchases and activities.
- Improve the Balance. Re-examine the
numbers, looking for ways to increase income and further
trim expenses. Can another member of the family take on
a job? If you are renting, is it feasible to move to less
expensive housing? Determine if you are eligible for government
programs, such as unemployment benefits, food stamps or
housing programs. The Credit Union National Association
(CUNA) provides an online calculator to help you with financial
decisions. Go to the CUNA Web site at www.cuna.org/data/consumer/calc_debtsave.html.
- Contact your creditors. Speak directly
with the organizations to which you owe money. They may
be willing to arrange a payment schedule that enables you
to temporarily reduce monthly contributions. If you own
your home, ask your mortgage company about a forbearance
agreement, which can lower or eliminate payments for a set
period of time.
- Seek professional help. You may opt
to get help with your situation rather than handling the
details yourself. Assistance is available for little or
no cost through government programs or credit counseling
services, which will work with you to develop a long-term
plan to pay off debt, but may have implications on your
credit history. You may want to consult a financial advisor
for input and advice. Ask friends and relatives for recommendations
on advisors or contact professional associations, such as
the Financial Planning Association.
- Avoid predatory lending and money-making schemes.
Some lenders may prey on your vulnerability, offering easy
credit at exorbitant interest rates that can push your financial
situation to a critical point. Beware of "sure fire"
investments that promise quick returns; if something sounds
too good to be true, it probably is. Stick with reputable
- Consumer Credit Information, FTC brochures online at www.ftc.gov./bcp/menu-credit.htm
- "Credit and Your Consumer Rights," Federal Trade
Commission (FTC) brochure online at www.ftc.gov/bcp/conline/pubs/credit/crdright.htm
- "Job Loss", National Endowment for Financial
Education brochure online at www.nefe.org/fple/joblosspage1.html.
- "Knowing and Understanding Your Credit," Fannie
Mae booklet available by calling 1-800-688-HOME
- "Prioritizing Debt: Which Bills do I Pay First?"
Northwest Justice Project brochure online at www.nwjustice.org/docs/0110.html
- Financial Planning Association (www.fpanet.org)
- Internal Revenue Service (www.irs.gov)
- National Endowment for Financial Education (www.nefe.org)
This info about reducing
debt provided by the Certified Financial Planner Board of
2003 - four great web sites for you
for Late Savers by National Endowment
for Financial Education® (NEFE). New online resource
“ Guidebook to Help Late Savers Prepare for Retirement”.
User-friendly. Outlines more than a dozen catch-up strategies
– especially for those 50 and older – who
have realized they haven’t saved enough for retirement.
Steps to a Better Financial Future”
by AARP (American Association of Retired Persons) has
developed interactive CD-ROM targeted to pre-retirees
(age 40-60) with limited or no knowledge of personal financial
issues. 10 modules. CD is free with $4.50 shipping charge.
Order information on web site.
|The Economic Education Newsletter is an online
education resource for K-12 teachers provided
by the Baltimore office, Federal Reserve Bank of Richmond.
Features information on high school and college contests,
teachers’ workshops and other education programs.
Offers web links to financial literacy. Can view previous
newsletters or subscribe.
|The Annie E. Casey Foundation (AECF) has launched a
Family Economic Success (FES) website to provide a more
comprehensive way to address
the difficulties low-income working families face in trying
to move up the economic ladder. FES uses
a three-pronged approach, using strategies for workforce
development, family economic support, and community investment.
The website offers information on a range of topics for
helping families and communities to build strong financial
futures for practitioners, researchers, policymakers,
and the general public.