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Credit And Debt Management by: Kelly Kennedy Today's consumers benefit drastically from the usefulness of credit. Credit cards are especially useful for large purchases, emergency situations, 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. Do You Think You Might Have a Problem with Debt? Below is a list that will help determine whether you are a single mother debt problems. 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 danger signal to debt. Too Many Cards/Too Much Debt If you can't pay off your combined credit card debt within one year, you should consider this a serious issue. Out of Money Many people use credit for small purchases such as food and gas. If you previously paid cash for these 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 tapped 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. 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. It's important to remember, though, 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. Learn more about debt consolidation at Incharge. 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. If you noticed that you were nodding your head up and down as you read through the list of debt problems you could be on your way to a serious problem with your finances. What to do about it as a single mother comes next. Help for Single Mother if in Debt If you're ready to tackle your own debt pile, here's what you need to do: 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 youÕre not sure call your lender and ask. Prioritize your debt Divide your debts into two piles About The Author Kelly Kennedy writes for http://www.singlemotherresources.com, a great online source for single mothers nathan@mindcomet.com This article was posted on September '01
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