Managing Your Credit

by Jeff Johnson

Often when I'm meeting with a family to discuss financial issues, I'm asked about debt management, debt consolidation, and how to manage one's credit and debt load. As credit cards have become a staple of the American shopper's wallet, the amount of debt most families are carrying has escalated dramatically. Today, the average American carries over $8,000 in credit card debt, and much of this debt is on credit cards with extremely high rates of interest which can exceed 21-25% in some cases. Add to this a few $30 late payment fees or "over-the-limit" fees for those cards that are charged to the maximum, and that $8,000 balance continues to compound.

So, what does one do when the bills just keep rolling in and there's no end in sight? I tell my clients that self-discipline is the key. The first step is to stop using those credit cards immediately. Store them away in a safe-deposit box or some other place where you cannot readily get to them when the urge to swipe the plastic strikes you. Better yet, cut them up. That is a sure-fire way to eliminate the temptation to charge.

Next, formulate a monthly budget. Make certain that the basic necessities are taken care of first. Be sure to set aside money from each paycheck for food, rent or mortgage payments, utility bills, gas and other necessities. Then, take the money you have left-over and devote some or all of it to paying down debt. Start with the card that has the smallest balance, and pay it off first. Continue to make just the minimum payments on all other cards until that one is paid off. Then, move on to the next smallest card. Pretty soon you'll not only be eliminating debt, but you'll be freeing up money that was previously going toward minimum payments that can be added in as payments toward your other cards.

If you find that this strategy is not working for you, another option is to contact the local chapter of the National Foundation for Credit Counseling by visiting their website at www.cccsalt.org or calling 1-800-251-2227. This is generally a free service (they may ask for a small donation), and their counselors will work with you to establish a budget. In many cases they can even negotiate with your creditors to help lower your interest rates and stop the extra fees and collection calls. Your counselor typically will establish a regular monthly payment plan whereby you commit to paying off your debt within a certain time-frame.

Managing your credit and debt load can be a real challenge for anyone, but again, discipline is the key. Moving to a cash-only system and away from the plastic is the first step toward financial freedom. There are no quick-fixes, and the many TV commercials that promise to help eliminate your debt overnight may end up causing you more problems than you had in the beginning. Only by changing your spending habits can you ensure that you will be able to live a debt-free life and take control of your personal finances.


Jeff Johnson
Holland Financial Services, Inc. in Athens
706-369-8888
jpjohnson1@bellsouth.net