People struggling under a load of debt often ask themselves, "How did I get here?"
The exact reasons are as varied as the people themselves. But, luckily, there are several different "road maps" to help people travel from debt to solvency.
I covered a few ideas last week. This week, I've got a few more, courtesy of Kent Moore, senior vice president and chief lending officer for Mountain America Federal Credit Union in West Jordan, and Don Milne, product manager for Salt Lake-based Zions Bank. Don works with the bank's End Needless Debt program.
If you haven't yet found the answers to your debt problems, one of these may show you the way out.
Kent and Don talked last week about the pros and cons of closing out credit card accounts after paying them off and Americans' need for better education about personal finance.
That education about managing your money and staying out of debt starts with a simple process that most people ignore.
"It's as simple as living within your budget," Kent says. "In what little financial counseling I've done, it has never been a matter of income. It's always a matter of expenses and justifying your needs and your wants."
Don says surveys he has seen show that only about 5 percent of people do a monthly personal budget. And it is only after they learn to budget that people who face high debt loads may want to consider a consolidation loan.
"If they can do a budget and they can tell their money where to go, maybe that consolidation loan will give them a cushion and help them get out of debt," he says.
The problem, Don says, is many people use a debt consolidation loan to lower their monthly payments from, say, $500 to $300 per month. But instead of saving that extra $200, they go out and spend it on "lifestyle."
"Part of budgeting would be to shut down behaviors that got them into the mess in the first place," he says. "Either they spent too much on credit cards on impulse purchasing. . . . Or the other problem is people have emergencies and no savings, so they put it on credit cards, not because they're impulse shoppers, but because they have no choice."
Kent agrees that learning to budget is vital for anyone considering debt consolidation.
"Also, consolidating credit cards can still be a viable option even when you don't own a home," he wrote in an e-mail. "Consolidation can restructure your payments to make your budget more manageable. Yes, the interest rate may be higher than a home equity loan, but probably less than your credit card, or at worst, an interest rate equal to what you are paying now, just fewer bills each month."
He said some experts recommend using mortgage refinancing to pay off credit card debts, but the flaw in that is "now you have to pay them off over the next 30 years."
"This option is used by many people, but I recommend they make extra payments equal to the sum of their consolidated debts to help eliminate this debt altogether and not just string it out over a longer period of time," Kent says.
If people are interested in learning more about budgeting or debt consolidation, help is readily available.
For example, Kent says Mountain America contracts with the Balance financial fitness program (www.balancepro.org) and offers its services free of charge to members.
And Zions has END. Don says the program is fairly new and does require two hours per week for 13 weeks.
Many people don't want to take that much time, he says, "but the people that go to the classes are really motivated by the results they see."
Don says Zions schedules its classes three times a year, and the next session probably will start this summer. For more information, e-mail endprogram@zionsbank.com.
Both financial professionals say that, if you're struggling with debt, you need to act now to defeat the monster. You'll be glad you did.
"It's like any behavior change," Don says. "You have to want to change in order for it to work. Otherwise, you're just going to live in denial."
If you have a personal or family financial question, please send it by e-mail to gkratz@desnews.com or by regular mail to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.
E-mail: gkratz@desnews.com