Read Contracts Carefully Before Signing

alderman_color_1By Jason Alderman

If you always stop to read the fine print before signing anything, congratulations – your parents trained you well. If you don’t, beware: Your signature could commit you to a long-term gym membership you don’t really want, an apartment you can’t afford, or worst of all paying off someone else’s loan you cosigned.

Broadly defined, contracts are mutually binding agreements between two or more parties to do – or not do – something. It could be as simple as buying coffee (you pay $3 and the restaurant agrees to serve you a drinkable beverage), or as complex as signing a 30-year mortgage.

Once a contract is in force it generally cannot be altered unless all parties agree. And, with very few exceptions (e.g., if deception or fraud took place), contracts cannot easily be broken.

Before you enter a contractual agreement, try to anticipate everything that might possibly go wrong. For example:

  • After you’ve leased an apartment you decide you can’t afford the rent or don’t like the neighborhood.
  • Your roommate moves out, leaving you responsible for the rest of the lease.
  • You finance a car you can’t afford, but when you try to sell, it’s worth less than your outstanding loan balance.
  • You buy a car and only later notice that the sales agreement includes an extended warranty or other features you didn’t verbally authorize.
  • You sign a payday loan without fully understanding the terms, and end up owing many times the original loan amount. (The same goes for pawnshops and car-title loans.)
  • You buy something on sale and don’t notice the store’s “No returns on sale items” policy.
  • You click “I agree” to a website’s privacy policy and later realize you’ve given permission to share your personal information.
  • You buy a two-year cellphone plan, but after the grace period ends, discover that you have spotty reception and it will costs hundreds of dollars to buy your way out.
  • You buy smartphone insurance, but don’t discover until after it’s been stolen that they can replace it with a refurbished model.

Financially inexperienced teenagers and young adults often make these kinds of mistakes, so discuss the implications of signing contracts with your kids well before they turn 18.

Cosigning a loan. This can be particularly risky. If the other person stops making payments, you’re responsible for the full amount, including late fees or collection costs. Not only will your credit rating suffer, but the creditor can use the same collection methods against you as against the primary borrower, including suing you or garnishing your wages. Still, there may be times you want to cosign a loan to help out a relative or friend. The Federal Trade Commission (FTC) has a handy guide that shows precautions to take before entering such agreements. If you’re trying to help your child establish a credit history, another alternative would be to make him or her an authorized user on one of your accounts. They’ll get their own card, and you can usually restrict the amount they’re able to charge. But be aware: Authorized users aren’t legally responsible to pay balances owed, so oversee account activity closely.

Cooling-off rule. If you buy something at a store or online and later change your mind, you may have a difficult time returning it. But if you bought an item in your home (e.g., from a door-to-door salesman) or at a location that’s not the seller’s permanent place of business (e.g., at a fairground or hotel room) you may be protected by the FTC’s Three-Day Cooling-Off Rule. Under this rule, the salesperson must reveal your cancellation rights at the time of sale and give you two copies of a cancellation form (one to keep and one to send) and a dated copy of your contract or receipt. Note that numerous exceptions apply. If your purchase is eligible under the rule, however, you have three business days in which to ask for a full refund.

A few additional reminders about contracts:

  • Ensure that everything you were promised verbally appears in writing, especially such terms and conditions as interest rates, down payments, discounts, and penalties.
  • Make sure all blank spaces are filled in or crossed out before signing any documents –including the tip line on restaurant and hotel bills.
  • Don’t be afraid to ask to take a contract home for more careful analysis or to get a second opinion. A lawyer or financial advisor can help.
  • Don’t be pressured into signing anything. If salespeople try that tactic, walk away. (Be particularly wary at timeshare sales meetings.)
  • Keep copies of every document you sign. This will be especially important for contested rental deposits, damaged merchandise, insurance claims, extended warranties, etc.
  • Take along a “wingman” if you’re making an important decision like renting an apartment or buying a car to help ask questions and protect your interests.
  • Be wary of “free trial” offers. Read all terms and conditions and pay particular attention to pre-checked boxes in online offers. Failure to uncheck them may bind you to unwanted terms and conditions.

Bottom line: Contracts protect both parties. Just make sure you fully understand all details before signing on the dotted line.

Follow Jason Alderman on Twitter: http://twitter.com/PracticalMoney

Jason Alderman is Senior Director, Global Financial Education, with Visa, Inc.            

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Financial Essentials Checklist
for the College-Bound

GailCunninghamBy Gail Cunningham

Many young adults are leaving home for the first time, yet remain ill-prepared to independently manage their personal finances. This is predictable considering that less than one-half of the states mandate a course in personal finance as a requirement for high school graduation.

Further, the 2014 NFCC Financial Literacy Survey revealed that the majority of adults say they learned the most about personal finance from their parents, which is true whether mom and dad possess good or bad financial habits. Proving that parents may not be the best teachers of personal finance, more than four in 10 survey respondents, 41 percent, gave themselves a C, D or F on their grasp of personal finance. Therefore it should be no surprise that many young adults smart enough to get into college remain ignorant of even the most basic financial skills.

Whether it’s off to work or off to college, parents put a lot of time and money into preparing their child to leave home, but often neglect the basic life skills associated with personal finance. With just a few weeks until the young adult children will head out the door, the time is now for a crash course in personal finance.

The NFCC provides the following Personal Finance 101 checklist of basic knowledge everyone living on their own for the first time needs to possess in order to start off on the right financial foot.

  • Start with budgeting - Learned early, the discipline to live within a budget is a skill that will pay benefits for a lifetime. Parents should be transparent with their child about how much money is available for expenses and jointly create a workable monthly budget. Once on their own, students should track their spending to know where their money goes and stay in control of spending. This can be accomplished by tracking on paper, using a budgeting computer program, or a smartphone app. The method isn’t important, but knowing how the money is being spent is.
  • Understand basic banking. Even those who do not write many checks each month need to understand the importance of recording transactions in their check register and promptly balancing the bank statement. Along with checks, ATM withdrawals and debit card purchases should be recorded in the checkbook after each use, with a running balance tallied daily. Attempts to withdraw funds beyond the account balance could result in being declined at the point of sale unless other arrangements such as overdraft protection have been put in place. Since overdraft fees can quickly add up, it is best to keep track of the account balance and not exceed it.
  • Respect credit. Credit matters now and it matters later. Young adults under the age of 21 cannot obtain a credit card unless they can prove ability to pay or have a co-signer. Nonetheless, many will have plastic in their wallets when they leave home. Studies show that a disturbing number of college graduates have both student loan debt and credit card debt which can prevent them from moving forward with their professional lives. However, young adults also have the opportunity to graduate with a positive credit file which could help them buy a car, rent an apartment, obtain insurance, or land the job of their dreams. To have an unblemished credit report and a solid credit score, commit to paying each credit card bill in full and on time each month.
  • Be financially organized – Keep all financial records, bills, and bank statements in one location. A file or accordion folder in a locked file cabinet is ideal. Since spare time may be hard to come by, this system allows quick access to what is needed when it’s needed. Being financially organized ensures that bills are paid on time, late fees are avoided, and the credit report and score are not damaged.
  • Recognize the dangers of Identity theft – Identity theft is common on college campuses. The identity thief may not be a stranger, but someone in the room next door. Computers and phones contain a wealth of personal and financial information, and should be password protected. Social Security numbers are like gold to a criminal, and should be stored in a safe and locked location. Memorize the number and do not carry the card unless it is needed for one-time verification purposes, then promptly store it again. Be cautious when posting information on social media, as sites are frequented by thieves trolling for seemingly innocent postings that can be pieced together to equal enough data to steal a person’s identity.

Everyone makes money mistakes, particularly those who are still learning how to responsibly manage their finances. Knowing that blunders are likely, parents should decide if they’re going to bail their child out or put tough financial love in place. This is a family decision that is best made in advance, not in the midst of the emergency. However, it is critical that parents not allow the child’s financial mistakes to ruin their own personal finances.

The NFCC recommends that parents and their young adult leaving the nest make an appointment with a certified financial counselor at an NFCC member agency location. Hearing financial advice from a professional may have a stronger impact than hearing it from mom and dad. To be automatically connected to the NFCC agency closest to you, dial (800) 388-2227, or go online to www.DebtAdvice.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

 

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 Look at the Big Picture

MarkFoster_CCOABy Mark Foster

Impulse spending can land us in hot water. Buying a TV or digital camera because it’s on sale and we want it now can create problems for us if we don’t first look to see if we can afford it. Many people do stop and think before making a big purchase. However, many people overlook small purchases like a gourmet coffee because, hey, it’s only five bucks, right?

Ben Franklin said, “Beware of little expenses. A small leak will sink a great ship.” Regular, small purchases can and do add up. The big picture for that $5 coffee or pack or cigarettes each day is around $150 a month or $1825 a year! Think about how some of that money could be better used – to knock out a debt, take a vacation, add to your emergency fund, etc.

Track your spending for one month by writing down your spending on a small notebook or large envelope – whatever’s easy for you. Then add up how much you spent on dining out, entertainment, groceries, etc. Dining out and entertainment are two categories people can easily overspend on. Did you find any overspending? If so, it’s time to make some changes! It doesn’t have to be all or nothing. You don’t have to cut out your coffee completely, but perhaps cut it down to once or twice a week and drink home brewed coffee the rest of the time, for example.

So if you regularly buy some small purchases like gourmet coffee, be sure to ask yourself “What is the big picture on this spending in a year’s time?” If it’s fairly large, you might decide to better use some of that money elsewhere.

Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. To schedule an appointment with a Certified Consumer Credit Counselor contact CCOA at 800.889.4916, or visit CCOA online at www.CCOAcares.com.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Smart Savings Advice For College Students

Lauralynn-2014By Lauralynn Schueckler

College students have a lot to worry about these days like classes, tests, schedules, roommates, partying, etc. That could be why so many college students put budgeting and financial matters on the “back burner.” The problem is that young people often don’t understand that they are setting themselves up for financial failure when they graduate if they don’t have a budget and a strong financial plan.

Students receive many credit card offers in the mail, and the temptation for what they perceive as “free money” is incredibly high. If you’re not cautious, you could wind up with more debt than just your student loans after you graduate. It is a good idea to open at least one credit card while in college to help build up your credit history and creditworthiness. However, it’s very important to use that credit wisely and pay off the balance in full each month. If you practice good habits with a credit card, you can establish a strong credit history and an excellent credit score further on down the road.

The CARD Act of 2009 prevents students who are under the age of 21 from applying for credit cards without proven income or a co-signer on the account. You could talk to your parents about co-signing on a credit card for you. Just remember that if you miss a payment on that card, then it won’t just be the lender you have to deal with, your parents will not be happy either. This is where creating a budget and laying out your financial future could come in handy. Show your parents that you can be responsible and act like an adult when it comes to your finances. If you create a realistic budget, set some goals, and know that you’ll have enough money each month to pay off the balance; then your parents are probably more inclined to co-sign for you.

As a college student, budgeting is one of the most important skills that you can learn. Practice disciplined money management by creating a budget and sticking to it. Remember, sacrificing now and living within your means will make it easier for you to get out of debt faster once you’ve started on your career path, and hopefully those student loans won’t hang over your head.

You can help to manage your debt by making interest-only payments while you’re still in college. You’ll want to speak to your loan service provider about this. Since the interest will begin to accumulate, making payments while still in school will help you chip away at the debt. Student loans are considered to be smart debt because of the asset that college gives you (a degree). Not only is it a valuable learning experience, but it helps with your employment opportunities as well.

Lauralynn Schueckler is the Online Marketing Specialist at Advantage Credit Counseling Service. She is the author for Advantage CCS’s Blog called Dollars & Sense. Advantage Credit Counseling Service is a member of the National Foundation for Credit Counseling. Contact Advantage Credit Counseling at 866.699.2227, or visit them online at www.advantageccs.org.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Urban Institute Study Raises the Question
Why People are not Reaching Out for Help

GailCunninghamBy Gail Cunningham

The recent study released by the Urban Institute reveals that 35% of Americans have accounts in collections. So what keeps consumers from reaching out for help?

NFCC member agencies assisted more than 1.5 million people last year with their financial concerns, but that is a only a fraction of the 77 million Americans who have debt in collections. It is a shame that so many are struggling financially when help is easily accessible and affordable.

Consumers may be hesitant to reach out for help due to misconceptions about financial counseling. Below are some of the false beliefs that consumers admitted in the 2014 NFCC Financial Literacy Survey:

  • Financial counseling costs too much. The truth is that counseling through an NFCC member agency is either free or low cost. One of the requirements for agency membership in the NFCC is that no service will be denied based on an inability to pay. Cost should never be a barrier to finding the financial help needed.
  • It would be embarrassing to discuss my situation. It is highly likely that the trained and certified financial professional you visit with has encountered a financial problem similar to yours, and is skilled at resolving comparable issues.
  • Financial counseling agencies only offer advice, not real solutions. Although financial education is critical to financial success, when a person has debt beyond what he or she can responsibly manage, NFCC members do offer concrete options, such as a Debt Management Program (DMP). A DMP allows consumers to continue to service their debt, repaying it in full, but often with a more affordable monthly payment, a lower interest rate, and late fees and over-limit fees stopped or lowered.
  • Seeking credit counseling might damage my credit report and score. Credit counseling is not reported to the credit bureau, thus could not have a negative impact on a person’s credit report or score. However, if a person elects to repay their debt through a DMP, the creditor may make a notation on the credit report of participation in the program. Nonetheless, graduates of the DMP often emerge with improved credit scores due to having paid off the debt through consistent monthly payments.
  • Debt settlement or bankruptcy seems like better solutions. Both debt settlement and bankruptcy are serious financial decisions which can negatively impact a person’s credit report and score for years. Before opting for either, a person should first rule out all other alternatives.

There are severe financial consequences resulting from unmanageable debt, realities that should not be ignored.  Consider the following:

  • A blemished pay history reflecting late or missed payments tarnishes a person’s credit report which could result in a lower credit score;
  • A low credit score often equals a higher interest rate when borrowing money, making the cost of credit more expensive, and
  • A negative credit record could diminish access to additional credit needed for emergencies or unplanned expenses.

Further, the stress of unmanageable debt has destroyed marriages, shattered families, and contributed to lost jobs. No one ever scripts financial ruin as a part of their life plan, but when financial distress occurs, it is a very real part of a person’s daily activities, as debt is a burden people carry with them 24 hours per day.

The NFCC, the nation’s largest and longest serving network of nonprofit financial counseling agencies, stands ready to help all American families who are struggling with financial issues, whether they be around debt, housing, foreclosure prevention, or simply creating a workable monthly budget.

Don’t delay seeking help. Finding answers and solutions to your financial concerns starts by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Popular Money Advice You Shouldn’t Take

MaryHuntHeadshot-New as of 2-5-13By Mary Hunt

Money advice—it’s available everywhere. But that doesn’t mean you should take it. The wise person knows how to separate the good from the bad. Here are a few timely examples:

Bad advice: Do not save money for yourself until you have paid off your credit cards. Direct every cent you can scrape together to pay down your credit card debt as quickly as possible. It’s not smart to earn 1/2 percent interest on money you save while you are paying 20 percent or more on your credit card debt.

Good advice: That bad advice sounds great, but let’s get real. If you do not have an emergency fund, what will you do next month when your car breaks down or next summer when you lose your job? You will run back to your credit cards for a bailout. Unless you are aggressively building an emergency fund, you never will get out of debt because unexpected expenses always come up. Instead, you should pull back to making only minimum payments so you can start saving money now. You need to stash all the cash you can, to be used only in a dire emergency. Once you have that fund in place, you will be ready to tackle your credit card debt with a vengeance!

Bad advice: Purchase whole life insurance for children. The cash value will pay for college. It guarantees insurability should that child develop a health issue later that would make him or her uninsurable, and it will pay for the child’s funeral if that becomes necessary.

Good advice: The only purpose for life insurance is to replace income for dependents who would become financially destitute if the breadwinner were to die. If you want to save for college, life insurance is not the way to do that. Instead, set up a 529 savings plan or another type of savings or investment vehicle. If you are concerned about a funeral (statistically, the chances of a child’s dying are very small), create a funeral account. As for the insurability issue, chances that your child will become uninsurable for health issues are very slim. Unless you have money to burn, buying life insurance on non-wage-earning individuals who have no dependents is a terrible waste of money.

Bad advice: Do not pay off your mortgage, because you would lose a valuable tax deduction. Mortgage interest on your principal residence is a deductible expense on your federal tax return. Even if you can pay off your mortgage, don’t do it. If you don’t have a mortgage, get one so you can claim this tax advantage.

Good advice: Deductibility is not a wonderful thing. It’s a “consolation prize” to ease the pain of having to pay interest. If you pay $12,000 a year in mortgage interest and you are in the 22 percent tax bracket, you get to deduct $12,000 from your gross reportable income. That means a tax savings of $2,640 ($12,000 x 22 percent equals $2,640). You pay $12,000 to get back $2,640. Does that sound great to you? If so, I’ll give you a better offer. Send me $12,000, and I’ll double it and give you back $5,280. Deal?

Mary Hunt is the founder of DebtProofLiving.com and author of 23 books, including her latest, “The Smart Woman’s Guide to Planning or Retirement.”

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 It’s Time to Get Our Heads
Out of the Sand

Kristine GammSmith photoBy Kris Gamm-Smith

It’s time to get our heads out of the sand approach-avoidance with your money is a sure way to experience financial stress at its best! As a credit counselor, more than half of the people I see for counseling have been practicing this strategy for a long time, and to no avail. It Doesn’t Work! It results in failure every time. To ignore our financial circumstances does not make it go away. So in spite of this fact, why do we still try to “flee” from our money problems by pretending everything is fine, or simply not paying attention to bills and creditor calls?

One primary reason that I hear consistently from clients is that they “couldn’t afford to pay the bills so why deal with it.”  But those phone calls keep coming, along with nasty letters and stacks of unopened bills. This behavior results in irritability, sleepless nights, strained relationships, and a feeling of powerlessness over YOUR money.

Of course there are unexpected life events that dramatically change our lifestyles overnight. Loss of a job, cut back in hours, divorce, death, or illness of a loved one that was also a primary provider, serious medical problems; and the list goes on. The large majority of people I see have no emergency fund or savings to help them through these difficult times.

Lack of planning and preparation are causal factors in our wanting to avoid managing our finances. One couple said that they believed that “If we ignored it long enough, it would go away.” Isn’t that often the way we choose to handle conflict in our lives? In fact, it takes paying closer attention to the ins and outs of our money when we have lost significant income, or when you are experiencing stress from other major life events that leave you depressed, anxious, and depleted emotionally. We are especially vulnerable at these times. And yet, so often, that is the starting point for our losing control of our finances.

Gayle and Jim (fictitious names for anonymity) are a good example of this. Gayle quit her job to become primary caretaker for her mother, who was terminally ill. Trying to raise two teenagers, and dealing with a 40% loss of income from quitting her job, seemed to send her over the top. She was the primary money manager in their relationship, and she didn’t want to burden her husband with more problems; his job was already consuming him physically and emotionally. So Gayle just kept quiet and ignored the bills she knew they couldn’t afford to pay right now, until they finally fell behind in their mortgage. Then they found themselves in a financial crisis. Both Gayle and Jim were aware of what had transpired and they knew they would have to adapt, but they chose to stay in denial and did not seek help until the consequences were much more devastating to them. They “buried their heads in the sand” rather than face the situation directly and take control of their money.

The moral of this story is that stress is not reduced by this approach-avoidance to money. In fact, we dramatically increase our stress by not facing it head on. We need to learn how to identify when we are in financial trouble, and ask for help when needed. That is why credit counseling exists….to help someone achieve financial wellness. We are here for you.

Kristine Gamm-Smith is a Certified Credit Counselor with Chestnut Credit Counseling Services. She has a Master’s degree in Rehabilitation Counseling, and over 30 years of experience in the mental health and substance abuse field in addition to her experience as a credit counselor. Chestnut Credit Counseling Services is a member of the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Five Steps to Finding $1,000
for Holiday Spending

GailCunninghamBy Gail Cunningham

The 2014 holiday season is a short five months away, yet many are financially unprepared to begin shopping. In recent years, Americans spent an average of $800 on holiday-related expenses. That’s more than a week’s wages for many workers, and in spite of the fact that the December holidays are an annual event, people routinely neglect planning for them and resort to charging their purchases.

Consider the ramifications of this lack of planning:  If a shopper charges $1,000 and makes only the minimum monthly payment of 2 percent of the balance at an Annual Percentage Rate of 18 percent, it will take 12 years to pay off the debt.  Think of it this way – the ghost of Christmas past will haunt until 2026. Further, this generous consumer will have paid a total of $2,353 for the $1,000 worth of goods and services purchased.

The NFCC proposes a better plan. Since debt is a gift no one wants, the NFCC suggests five steps that consumers can put in place now in order to have money available for holiday spending and create a debt free holiday.

  • Before trimming the tree, trim everyday spending. Review current spending looking for leaks. Plug those leaks and use the found money for holiday spending. Amount saved by December 25 at $1 per day:  $150.
  • Adjust the W-4 to accurately reflect the amount of taxes owed. The average income tax refund in recent years has been close to $3,000, but Uncle Sam only returns that money in April, long after the holiday bills should have been paid. Amount saved by December 25 at $250 per month: $1,250.
  • Commit to shaving $10 off of 10 spending categories. Some obligations such as rent, mortgage, and car payments are fixed. However, there are other categories that offer a great deal of flexibility. Cut back $10 each month on categories such as food, clothing, gas, utilities, and entertainment without feeling deprived. Amount saved by December 25 at $100 per month:  $500.
  • Sell unused items.  Since others are also shopping, this is the perfect time of year to sell items that haven’t been used in one year. Amount saved by December 25:  $100.
  • Open a separate holiday savings account. Don’t mingle the holiday money with existing savings or checking accounts, as it could easily get spent on other items. Amount saved by December 25:  $1,000.

If you’re still paying for holiday spending  from 2013, consider rethinking your gift giving for this year. It makes no financial sense to pile new debt on top of old. Kindness and experiences are meaningful substitutes for purchased gifts, and are remembered long after the wrapping paper and bows have been discarded.

Find answers and solutions to your financial concerns by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 5 Basic and Simple Ways
to Reduce Your Credit Card Balances

Years ago, I found myself in the unenviable position of being about $30,000 in debt, mostly due to credit cards. Why I dug myself into such a deep hole isn’t important. What matters is what I did about it.

Surprisingly, getting out of debt doesn’t have to be difficult. However it does require you taking a good look at the situation you’ve created so you can craft an intelligent way to get out of it. Once you get that out of the way, it’s mostly a matter of establishing and following simple steps to reduce your credit card balances and eliminate them for good.

1. Total Your Debt
First, you need to know exactly how far in debt you are. This can be uncomfortable, but adding up how much you owe to each creditor is essential. From there you can better determine which cards to pay off first (according to interest rates, for example) and develop a pay down plan according to your budget.

2. Get on a Budget
One of the problems I had is that I didn’t know the ratio of my spending to income, so I was spending more money than I made. The way to solve this is to make a personal budget. There are a variety of websites available that can help, such as Mint and BudgetPulse. Accurately input all of your monthly expenses, as well as your income to get started. If you are spending more than you are making, trim your nonessential expenses and research the Internet to find ways to cut your monthly bills.

3. Create a Realistic Pay-Down Plan
Trying to eliminate all your debt in three months probably is not feasible, and if you set an unrealistic goal, you may get frustrated and give up. Instead, create a pay-down plan that is realistic. For example, say you have $4,000 in credit card debt, and after all expenses are paid have $100 to devote to it each month. By applying that $100 to your debt each month, you can be debt-free in three years and four months. If possible, reduce your monthly bills to free up even more money to “snowflake” your debts.

4. Create Goals and Adjust Them as Necessary
As you craft your pay-down plan, include short- and long-term goals. Obviously, per the above example, your long-term goal is to be debt-free in three and a half years – but if you don’t include short-term goals, you can lose motivation. Therefore, set benchmarks along the way to make sure you are on-track. If after six months you find yourself slightly behind schedule due to other unforeseen expenses, don’t give up – readjust your goals and keep plodding along. On the other hand, if you get a raise at work or an unexpected bonus, apply this money to your debts, and adjust your timeline to account for the extra income.

5. Reward Yourself
When you meet your benchmarks, don’t be afraid to do something nice for yourself, even if it involves spending a small amount of money. Treat yourself to a ballgame, take in a free concert, or enjoy a night out at a modestly priced restaurant. One thing I learned along the way to a debt-free life is that motivation is of the utmost key. Congratulate yourself whenever it makes sense.

Once you become debt-free, be sure to stick to your new found and fiscally responsible way of life. Instead of paying off credit card balances every month, redirect that money to an emergency fund or retirement account. If you’ve never lived life without credit card balances, you’ll be amazed how liberating it is, and how much easier financial management becomes.

What additional ways can you suggest to reduce credit card balances?

Jay Barnes managed to dig himself out of thousands of dollars in consumer debt. He now works on wisely managing his finances and shares his insights with others.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 What to Get the Grad Who Has…Nothing

donna freedman photo (smaller)By Donna Freedman

Know a college senior who’s moving into his own place post-diploma? Want to give a gift even though you’re on a budget? Forget the $20 bill or the iTunes card. Instead, buy some dishtowels, a laundry basket, or a johnny mop. Your preparing-to-launch student may have saved up the first and last month’s security on an apartment. But does he have a can opener?

People who’ve never lived on their own might not think about the necessities of daily living – that is, until they need to do laundry, clean the bathroom, or take a frozen pizza out of the oven. (Potholders? Who thinks about those?) Best-case scenario: You go in with some other friends or family members, each one providing one or two (or more) items. This can be done as a series of frugal hacks. Here’s how.

Hit the discount shops

Stores like Target, Rite Aid, and Walgreens frequently put basics like salt, baking soda (as good as Ajax), spices, dish soap, sponges, and rubber gloves on sale as cheaply as two for $1. Watch for specials: When I moved into my apartment in 2005, I got a toilet brush free after rebate from Walgreens.

Dollar stores have their critics, and sometimes the disdain is justified. (Tainted toothpaste, anyone?) But really: How much do you want to pay for a mop bucket? Dollar emporia can yield brooms, scrub brushes, dish towels, shelf liners, and tons of kitchen tools.

Of course, I’ve also found such items at yard sales. The first place to start is the “free” box, if there is one. Among the gratis goodies I’ve obtained: a small saucepan, Tupperware, a spoon rest, an apron, spatulas, utensils, and my beloved cast-iron frying pan.

Rummage sales and thrift stores are good places to shop, too. I bought silverware (a couple dozen pieces for 50 cents) and cloth napkins (six for a quarter) at a church sale, and paid 35 cents for a toothbrush holder at a charity thrift shop.

Hot coffee and laundry money

I think a slow cooker is a terrific thing to have. Include a list of websites specializing in crock-pot cuisine.

Target and Walgreens, among others, put small appliances on sale fairly regularly. Unless your young grad is a java snob – and can he really afford to be, with student loans looming? – then a $6.99 coffeemaker will work just fine.

A toaster oven beats a toaster because you can use it to roast or broil a couple of chops or a chicken breast. Since counter space is usually tight in starter apartments, pass on the electric can opener in favor of a good-quality manual variety.

Other possibilities:

  • Aluminum foil, plastic wrap, plastic bags. (Reusable containers save money over the long haul, though.)
  • Paper towels, toilet paper.
  • A flashlight and some batteries, preferably rechargeable.
  • Ibuprofen or acetaminophen, some bandages, antiseptic ointment. Watch for rebates.
  • If you’re really flush, a roll of quarters for laundry. If not: A piggy bank (or jar) with a few bucks’ worth of seed money.
  • Basic foodstuffs like canned tomatoes, spaghetti, rice, baking mix, pasta sauce, canned or dried fruit, crackers, beans, tuna, soups, peanut butter.

Presentation is all

If you’re going in with a group of people, place the items into a big laundry basket. You could put cleaning supplies in a bucket, group kitchen items inside a large pot, or fill a reusable shopping bag with pantry staples.

Oh, and before you go shopping? Check your own cupboards. You might be able to put together an apartment starter kit from things you already have.

Don’t worry about not spending “enough.” Nobody will know what it cost unless you blurt it out – and why would you?

Getting the best deal can mean that you’re able to give more than you thought. If you’re on a super-tight budget, it could mean being able to give anything at all.

Here’s a tip, though: Don’t give ramen. Really. That’s just cruel.

This article originally appeared at DonnaFreedman.com

Donna Freedman won regional and national prizes during an 18-year newspaper career, and earned a college degree in midlife without taking out student loans. She now writes the Frugal Nation website for MSN Money, blogs at DonnaFreedman.com,and freelances for national magazines.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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