Help for the Single Mother with Managing Credit and Debt
Today's consumers benefit drastically from the usefulness of credit.
Credit cards are especially useful for large purchases, emergency
situations, making reservations, identification, and protection from
fraud. Unfortunately, millions of consumers abuse credit cards beyond
their financial earnings. The use of credit results in costly interest
payments and late fees, impulse buying, overextended lifestyles, and the
unnecessary stress from harassing telephone calls from collectors.
If you answer yes to more than one of the following listed below you might
want to consider getting help with finances.
Over the Limit Credit Card Spending
If all of your credit card balances are greater than 80 percent of your
credit limits, you should consider this a bright red danger signal to debt.
Too Many Cards/Too Much Debt
If you stop using your credit cards and still can't pay off your combined
credit card debt within one year, you should consider this a serious issue.
Out of Money
Many people are starting to use credit for small purchases such as food
and gas. If you previously paid cash for these items or other small items,
but are now using credit, not debit or cash, it could be a sign that there
is a problem.
High Debt-to-Income Ratio
Your debt-to-income ratio measures the amount of debt you have against the
amount of income you are making. You can calculate this ratio by dividing
your total monthly debt payment (excluding mortgage/rent) by your total
monthly gross income (before taxes). If your debt-to-income ratio is close
to or over 20 percent, this is a sign that you may have a debt problem.
Emergencies
Crises and emergency situations do occur, and sometimes people are unable
to afford such things such as emergency auto repairs or medical expenses
because their credit cards are maxed out or the majority of their earnings
are put towards debt repayments. It's always important to keep an open
line of credit available for such situations or even better, having an
emergency savings.
Minimum Payments
What many people don't realize about revolving credit card bills is that
making only the minimum payment can take 12 to 15 years to repay. You are
not applying any significant amount toward the principal if you are only
making minimum payments concluding that you may be overextended and in
need of putting together a spending plan.
Using Your Credit to Make Payments on Other Cards
Taking cash advances to pay bills is not a solution for paying off debts.
If you are paying one credit card with another you are actually creating
more debt. You will also be faced with any cash advance fees and interest
from that new line of credit. Balance Transfers
Many creditors offer new credit cards with balance transfers available at
low interest rates for only a limited introductory period. If you are
transferring balances from one card to another, it's important to remember
that after the introductory period the interest rate usually skyrockets up
to 19 percent or more. As well, a growing number of credit cards are
associating fees with transferring balances.
Skipping Payments
If you are late with getting payments in such as your mortgage, rent, car
loan, or utility bills more than once per year and are juggling bills and
skipping payments, this is a definite sign that you have a debt problem.
Borrowing Money
If you are borrowing money from family and friends and unable to pay them
back while struggling to pay your bills, credit counseling can teach you
how to budget or advise you to go on a plan for paying off your debts.
Debt Consolidation Loans
Are you borrowing from a new source to pay off an old debt? Many people
who do so obtain debt consolidation loans to pay off all their existing
bills. However, once the bills are paid off, some people wind up charging
on their credit cards again. This means having to pay back the loan plus
the new credit card charges, which ends up driving people into further
debt. Unsure of the Amount Owed
If you have no idea how much debt you owe on a monthly basis and keep
using credit cards, your financial spending might be slipping out of your
control.
Now looking back on the list if you answered yes to one or more of the
debt concerns, you should consider getting help managing your finances to
prevent further debt.
Help for Single Mother if in Debt
Get to know your debt.
Study everything relevant about your debt such as your account balances,
the interest rates, if the interest is deductible, how and when those
rates can change and find out if you'll face any kind of penalties for
paying an account early. If you're not sure call your lender and ask.
Next, prioritize your debt.
Divide your debts into two piles, deductible and non-deductible debt.
Non-deductible debt is debt where you don't receive a tax break on the
interest such as credit cards, car loans and personal loans. Deductible
debt includes mortgages, home-equity loans and possibly student loans
depending on your income. Once you divided your debt into piles rank them
from highest interest rate to lowest.
Eliminate your debt.
You can start with your highest interest rate, non-deductible debt-or the
non-deductible debt with the smallest balance. Either way, put as much
money as you can toward your first debt-elimination target. Once you pay
that account off, take the same amount of money and put it towards your
next target. Keep doing this until you have no non-deductible debt left.
Next you can start tackling your deductible debt, boost your investing, or
both.
Below are some effective ways of cutting down expenses and saving money:
1) Cut down on long-distance telephone calls or make calls when rates are
cheapest.
2) Cut down on restaurant and take-out meals. Prepare your own food.
3) You'll save a lot by bringing your lunch to work and packing your
children's lunch. Put yourself on a lunch budget where
4) you treat yourself one or two times per month.
5) Try to reduce your home-utility bills by turning off lights when you're
out of the room, being conservative with the thermostat, checking weather
stripping to eliminate drafts, and air drying dishes and laundry.
6) Use your own bank's ATM to avoid fees from other banks.
7) Seek out garage sales and your newspaper's classified sections for
discount purchases such as toys, clothes, and new and used items at a good
price.
8) Go to matinee movies instead of the regular showings where prices are
raised
9) Clip newspaper, magazine, and other print coupons.
10) Save on expensive dry-cleaning costs by purchasing a book on fabric
care.
If you have fallen into debt, don't lose sleeping stressing over the
matter. It happens everyday to people just like you but each day people
are starting to realize they need to do something to eliminate their debt.
So take charge of your finances and you'll see improvements in no time!
Singlemotherresources.com is the number one resource for single mother
home loans and grants for single mothers.
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