Credit, they say, is one of those things that gets better the less you use it. It can be a useful and convenient tool. But for many Americans these days, its easy to get caught in the credit trap. The widespread availability of credit, the myriad ways to use it to fulfill wants, make it easy to pile up the bills.
Periodically, says Trent Searle, USU Extension Agent in Davis County, you need to take a good hard look at your debt situation. You may not think you have a problem because you can pay all your bills on time. What you need to ask, he says, is what would happen to your finances if you suddenly lost your job, became seriously ill or became widowed or divorced. If you are in debt to the point where you have no savings to help cushion an unexpected catastrophe, you have a problem, he says.How can you get out of the debt trap? Searle offers some sug-ges-tions:
- Keep track of your expenses on a daily basis to avoid the little leaks that many people encounter.
- Don't try to win the battle alone; get everyone involved. Decisions that affect all family members should be shared.
- Consider all your options. Trim your expenses and squeeze your budget. Look for ways to increase your income. Use the extra you can come up with as "power payments" in paying off debts. Start with small goals: pay off the smallest debts first.
- When your first debt is paid off, don't start spending that money. Shift the entire amount to compound payments of your next debt and so forth until all debts are paid off.
- On credit cards, as you make payments and reduce your balance, the bank will lower your minimum monthly payment. Ignore the decrease. Keep the payments at your "power payment" level, or your pay-off date will take much longer.
- Commit to not using your credit cards. You'll never pay them off if you keep digging yourself deeper in debt.
- If you are already behind on payments, call your creditors and advise them of your situation. They can often work something out that will relieve a temporary crunch. If you have lost control and can't make ends meet or convince creditors to work with you, seek professional help. A good financial counselor might be able to get your current situation under control and help you avoid a similar credit trap in the future.