Finance

Dealing with Post-Holiday Debt

One of the least attractive chores of the post-holiday season is dealing with debt. The problem is made worse by the current economic situation. Unfortunately, most of the debt accumulated is placed on credit cards, which have high-interest rates, and large late fees. One of the shoes waiting to drop in the early part of the New Year is that credit card companies are shortening the chain on most borrowers. Credit availability will lessen with only those with the highest credit score being able to get credit. Gone are the days when poor credit risks will get credit for automobiles, credit cards, etc. Another unsavory prospect is that many who hold current cards will find them canceled, late fees and interest rates greatly increased, and the ability to pay your credit card bills made more difficult.

Dealing with mounting debt in an atmosphere such as the current economic crunch must be the first priority. The first step to success is acceptance. This should be a family meeting item. Your mate and children should understand that outstanding credit is about to become a three-alarm fire for the average middle-class American family. Do not wait until you are in a crisis to make budget-cutting decisions. Start the decision-making now.

Look carefully at every item in your budget to determine where you can cut, and apply the extra money to the credit card with the lowest balance. Make a calendar note of due dates for payments, and avoid being late, and incurring a late fee. The fees will increase on your cards if they have not already done so.

If you have excellent credit, now is a great time to refinance your house for a lower interest rate, which should reduce your payment. If feasible, take some extra money from the refinance to pay off cards. Do not take more than you need. Credit card interest may go as high as 29.99% and if the new mortgage rate is 5% this would be a good move, that is, provided you cut up your credit cards as soon as you pay them off.

Accept the fact that the future will be very different than the past. The buy now-pay later cycle is over for a very long time. Credit card debt, lack of savings, and our spend-yourself- into- the poor-house-days are over. The sooner we get in line with that thinking the better off we are.

Go over the family cell phone accounts. Cut out frivolous and unneeded service. The basic ability to talk is all you really need. The average family cell phone bill is almost $200 per month. Other than being ridiculous, it is a luxury, not a necessity.

Eat at home! Isn’t that a novel idea! Pack lunches for work and school. Save on groceries by shopping at a discount club. Clip coupons. Think that is extreme? These are extreme measures for extreme times? You will not believe the tidal wave that is headed for us economically in the New Year, and the survivors will be those who prepare now.

Check your electric bill to look for savings. Leaving on appliances, lights, etc. is a huge waste. Turn up the hot water thermostat. A huge percentage of the cost of electricity in a home comes from the kitchen. Always buy appliances with the Energy Star rating. If your refrigerator is old, a new one might well pay for itself in energy savings. In this case, credit might work if you buy on a big box card, offering a 1 year no interest purchase. Be sure to pay it off within the time limit, because if you do not, all the accrued interest will come back to haunt you.

Make a list of services you really need. For example, cable TV is not a need, it is a want. Reduce your package and apply the savings to bills. If you have health club memberships, renegotiate them, or start working out at home. You can buy really cheap, like new workout equipment at yard sales.

Get rid of extra “stuff” by having yard sales and apply the funds raised to the balance of current bills. It is amazing how much we accumulate, and holding on to it is ridiculous. Many families now rent storage space to keep “stuff” they have no use for, and will never use. Take a reality check! Get rid of it.

While many of these suggestions sound desperate, we are facing a crisis in the New Year of which we do not yet have a full sense of its seriousness. Survival will require quick action and a concerted effort on the part of each family member. Dealing with our credit mess individually will not only help with our personal situation but is the solution that will help the country as well.