Slam the Door on Debt

by : ARA Content offers ten tips to help you get out and stay out

(ARA) - According to American Consumer Credit Counseling, Inc., the average balance on a credit card is $7,000, offering an average interest rate of 18.9 percent.

Additional statistics show that the average household has 10 credit cards and, not surprisingly, over half of those households report having trouble paying their minimum monthly payments.

Common indicators of a debt problem include not knowing the state of your personal finances; not knowing how much you owe or what interest rate you are paying; missing payments; having poor savings habits; using one credit card to pay another, or living paycheck-to-paycheck.

For many Americans, the statistics and debt problem indicators hit even closer to home with the conclusion of the holiday shopping season and the onset of the ever-dreaded tax season. Facing debts is one of the major barriers for people in dealing with their personal finances.

One organization that understands the problems associated with debt management is (, a Web site intended for the 3 out of 4 Americans who hate financial planning. The site offers helpful tips for eliminating debt and staying out of debt in the future.

'Millions of Americans love the instant gratification of using their credit card and hate thinking about the serious consequences of accumulating debt,' says Randy Schuldt, a vice president with 'Debt can paralyze people from moving forward. But, with a solid plan and the right tools, paying off their credit cards and eliminating their debts can be tolerable and even enjoyable.'

Numerous options are available for those who are struggling to shut the door on debt. Declaring bankruptcy is not necessarily the best option. Sites such as provide advice, tools and resources for those needing assistance. Visitors to the site also have the option of e-mailing their questions and receiving a free answer from a professional with no strings or sales pitches attached.

To help you get started on the road to less debt and greater gratification, offers the following tips:

Put Yourself First

That's right! It sounds a bit surprising, but according to Debtors Anonymous (, it's critical to take care of yourself while eliminating debt. No, this doesn't mean that you can go on a spending spree if you are feeling depressed. Instead, get plenty of rest and eat well to keep energized while focusing on your goal of being debt free.

Keep a Record and Prioritize

Keep track of every nickel you spend for a month and record amounts spent in appropriate categories - i.e. housing, transportation, food, clothes, entertainment, etc. It doesn't have to be a fancy software program - just a pencil and a pad of paper will suffice. At the end of the month, analyze where your money is going. Decide if the items purchased are necessities or niceties. Be realistic. What spending can you eliminate or reduce in order to reach your goal of being debt free? Perhaps you can pack your lunch rather than eat out every day, rent a movie rather than see the latest release, or scale down on your clothing budget. Do you really need another tie or an additional pair of black shoes?

List Your Debts

Create a list of your debts - the amount you owe and the interest rate. Make the minimum payment each month - but more importantly, make a commitment to pay off the debt with the highest interest rate first by making an extra payment. After you've paid off that debt, apply the amount you were paying on the old debt to your next debt with the next highest interest rate. Don't reduce the total debt payment amount just because one debt is paid off.

Create a Spending Plan

Once you have made a record of how you spend your money and have concluded which expenses are necessary, then you are ready to create a spending plan. Start by projecting how much money you will spend in each category for the month. Change the amount if your situation changes. Didn't expect to break your arm and dent your vehicle's bumper in the same month? Make adjustments and move forward. Create a new plan for each month. This is the best tool to stay in control of your spending. Remember that some of these tips are appropriate for your lifestyle, some of them are not. Personalize your plan and keep focused.

Cut Up and Cancel

Get rid of those credit cards! Cut them up and cancel them. Be aware that when you try to cancel your credit card, the company may offer you an extended line of credit or a lower interest rate. Do not be tempted! It's not your glowing personality that entices them to do business with you. If you can handle having one, keep a credit card for emergency purposes (which doesn't include a last-minute trip to the Bahamas to beat the winter blahs). Pay off that one credit card each and every month - or else be back in the same shipwrecked boat of debt. Minimum monthly payments are not acceptable.

Debit Not Credit

Love the feel of plastic sliding through your fingers while making a purchase? Worried you will have withdrawal? Use a debit card that immediately withdraws money from your checking account. Experience the feeling of gratification knowing you've paid for the item you just picked out.

Income-producing Investments

Use credit to purchase items that give you some income-producing potential. There is such a thing as good debt - a mortgage for a home, a loan for an education or the start of a new business. Sorry, payments on an expensive new SUV don't count unless you make a living as a chauffeur.

Credit is Not Income

If you apply for one of the seven credit card applications that arrive annually in an average American's mail, and receive a $5000 line of credit, don't consider it a raise. It's not your money and you haven't earned it. You have simply been given the opportunity to accumulate debt at the lender's benefit. Americans paid out approximately $65 billion in interest last year alone. With the exception of your mortgage, credit payments should never exceed 10 percent of your income.

Shop Around and Be Smart

Take a look at other interest rates. Be smart. Don't finance your car with a credit card if you can get a car loan at a lower interest rate. If your current interest rate on your credit card is 15 percent and another company is offering you 8 percent, contact your credit card company and see if they will meet the competitor's rate. If not, take advantage of offers to transfer your higher interest rate cards to lower interest rate cards. It's worth the time to shop around while you are lowering your debt.

Save, Save and Then Save Some More

Start saving today. If your credit card payment of $500 per month was eliminated and you were able to invest that amount in a savings vehicle earning a 10 percent return, you would save over $1 million in 30 years. That's real money in your piggy bank.

Leave the Piggy Bank Alone

If you have already started a 401K plan or have a savings account, resist the temptation of using your investments to pay off your debt. Take advantage of the good side of interest - the compounding side - and keep your investments on track. Think long-term, not short-term, while paying off your debts.