Financial Literacy Month Topic #4: Debt

Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.--Ogden Nash

*Every time you use credit, you incur debt. Debt can have either a positive or negative financial outcome.
*Getting out of debt requires you to do the following:
-Review Your Situation (A budget would be a good place to start). Start tracking your expenses if you have not already.
-Gain Control: do not ignore the bill collectors
-Increase income (A good place to start is reduce your expenses!)
-STOP USING CREDIT! Cut up those cards immediately.
-Sell Something. Spring is here so how about you have a garage sell and start paying off debt.
-Debt Snowball (Pay minimum payments on all cards and once one card is paid off, apply that payment to next highest interest rate card or lowest balance.) Call 205-251-1572 for more information.
-Seek Professional Assistance –Speak with a non-profit credit counselor, if necessary. No need to be embarrassed. You are not the first person nor the last to get into credit trouble. Please call 205-251-1572 or visit to speak with a National Federation of Consumer Credit Counseling (NFCC) certified financial counselor who cares.

*7 Warning signs of too much debt.
-Monthly payments on debt exceed 20% of your take home income. Ex. $200 debt payment divided by $1000 take home pay equals 20%.
- You pay only the minimum due on your credit card bills each month, and sometimes you juggle payments, stalling one creditor to pay another.
-You can't save small amounts and don't have enough set aside for setbacks as a pay cut, an unexpected car repair, or an emergency visit to your parents
-Rely on cash advances to pay household bills.
-No idea how much debt you owe.
-Use credit for items you would normally pay for with cash.
-Start losing sleep and it effects your physical health.

2 comments (Add your own)

1. Peter wrote:
With Credit counseling, the cidert counseling company works with your cidertors to have your interest rates lowered so you can pay off your debt faster. You normally will make one payment to the company and they will distribute it to all your cidertors. Usually takes 4-7 years to become debt free. The Negative to cidert counseling is that while your cidert score itself will usually not be negatively effected by enrolling in a cidert counseling program, your ability to establish new cidert, or any use of existing cidert for that matter, will be abolished. Throughout the duration of the program, it is unlikely that you will be able to qualify for a home loan, car loan, or any other is hard to get a loan or cidert card during this period. Also, although interest rates are usually (but not always) lowered for consumers in cidert counseling programs, the monthly payments typically will stay the same as your minimum payments, and sometimes more. That means, for consumers that are truly struggling or unable to make their minimum monthly cidert card payments, this option will not provide cash flow relief. With Debt Relief, the debt settlement company can help people that are truly struggling with cidert card debt, by representing them in negotiations with cidertors to secure settlements of anywhere between 40-60% of the amount of debt owed (at time of enrollment). Of the debt relief options, debt settlement is the least expensive, and shortest in length, with most debt settlement programs averaging between 24-48 months in length.The Negatives to debt relief include negative marks on your cidert for up to seven years. Also, most cidertors will report the forgiven debt as income and will send you a 1099c form. You have to report this as additional income on your taxes which would increase the amount of taxes you owe on your tax return. Here is an article that can help you in your search. It is a review of a company I personally used. I was in a simillar situation as you and they where able to help me pay off my debt in 2 years. My cidert rating actually went from the mid 500s to a 680. My debt to income ratio was reduced to nearly nothing which was the main reason for the increase, but they also assisted in removing negative marks on my cidert and unlike debt consolidation, or debt settlement, I don't have to worry about any negative marks following me around for the next 7 years. Thanks to them, I was able to get a loan for a home (just in time before the $ 8000 tax cidert ended phew).Good Luck!!

Thu, May 31, 2012 @ 8:45 PM

2. elqqaoojnfi wrote:
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Fri, June 1, 2012 @ 9:09 AM

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1401 20th Street South
Birmingham, AL 35205
Gateway Family Resource Center
Fax: 205-510-2621
Gateway Residential / Day Treatment Center
5201 Messer Airport Highway
Birmingham, AL 35212