The New You in 07: Resolving to Get Out of Debt

The New You in 07: Resolving to Get Out of Debt

Are you one of the millions of Americans vowing to get out of debt in 2007?
Mike Sullivan, director of education for Take Charge America, a national non-profit credit counseling company, says it's possible with planning and restraint.
"Time and time again we see people who will stick to new budgets for the month of January, and then it all falls apart in February," he said. "Getting out of debt and establishing credit is an ongoing process. You always need to be on guard."
According to the credit card industry, about 80 percent of American households have at least one credit card. Among those, the average household has racked up about $9,000 worth of debt--and that doesn't include mortgages.
Sullivan adds that the first step to becoming debt free is to create a budget. The second: find a realistic and workable way to abide by the plan. He has five suggestions to help make this New Year's resolution stick:
* Do More than the Minimum- Paying the minimum balance each month can prolong your debt status by years. If you are in a position to double the minimum payment, do so. If not, pay as much as possible. You may find that making small budget shifts will free up lots of extra cash to make these additional payments.
* Every Little Bit Counts- A few bucks here and a few bucks there really do add up. For example, an $8 lunch purchased five times a week adds up to $160 a month. That's a sizable chunk of money you could put towards paying off a credit card balance, simply by bringing your lunch to work. Other small money moves that add up: skipping coffee breaks, cutting back on dry cleaning or trying at-home substitutes and cheaper cell phone plans.
* Remove Temptation- If you've become addicted to plastic, leave your credit card at home when you go shopping. If you are having debt trouble, don't purchase luxuries or other unnecessary items on your credit card if you can't afford to pay off the balance in its entirety at the end of each month. If you still need help restraining, bring a supportive family member or friend with you when you shop to help avoid temptations.
* Lower Your Interest Rates- Did you know lowering your interest rate may be as simple as a phone call? Credit card companies don't want to lose your business, so if a creditor fears that you may transfer your balance to a credit card with a lower rate, then he/she may offer you a lower interest rate on your existing card. Visit www.cardweb.com to scan credit card comparisons.
* Look into Balance Transfers- Balance transfers can be a big help, but they're not for everyone. If you are in a position to pay off your high-interest debt within a year, consider transferring your balance to a zero-or-low interest credit card. However, there is a catch with these cards. After the special introductory period (length of time differs from card to card), your low rate can skyrocket into the 25-percent-plus range. Plus, there is typically a 3 percent transfer fee, which can also prove to be costly. So, if you can't pay off your total balance before the end of the low introductory rate, transferring balances may not be worth it.
* Speak to a credit counselor- Does your debt overwhelm you? Whether you need a nudge in the right direction, or you are desperate for a financial overhaul, you should consider speaking with a credit counselor. A credit counselor can help you create a workable budget and manage your debt more efficiently. Visit the Better Business Bureau at www.bbb.org to check out reputable credit counselors. You can also visit www.takechargeamerica.org for more information.