Thursday, April 21, 2005 10:45 AM CDT
Taking control of your finances is first step to overcoming debt
By NATHANIEL WEST, Staff Writer
CHARLESTON -- With graduation just around the corner for many college students, the realities of life are sinking in — getting a job, a home, a spouse, and so on.
And, for most, getting out of debt is linked inseparably to all of these facets of adulthood. But college students don't have to wait until graduation to begin wrestling their debts under control, said financial experts.
Paying off credit card debt, or avoiding it in the first place, is one of the first steps toward financial freedom, experts said.
"I think the real worry for us is that today's college kids carry more credit card debt than any previous generation," said Cris Daugherty, Decatur branch manager for Consumer Credit Counseling Service of Central Illinois.
Credit card payments eat up monthly income, and accounts with high balances make the bites even bigger as high interest charges begin to accumulate, according to the National Foundation for Credit Counseling.
"Carrying a credit card balance is costly," according to literature from the NFCC.
With this in mind, Chat Room offers these tips for losing the credit card weight and then keeping it off:
Get the ball rolling
Financial advisers like the term "debt snowballing." It means paying off the smallest debt first, then taking the money you were spending on that debt's monthly payments and adding it to the monthly payments for your next lowest debt, said Stephanie Ogle, financial health coordinator at Eastern Illinois University in Charleston.
With each phase, the debts diminish, while the amount of money available for debt repayment gets exponentially larger.
In other words, the snowball grows as it rolls downhill, and picks up speed as it gets fatter.
Tracking
It's virtually impossible for any business to operate without a budget. But many individual people live (and get into debt) without a clue as to what they are spending, and where they are spending it.
So it's crucial to list all of your bills and sources of income in writing, said Daugherty.
"Know where your money is going," she said.
Ogle said this helps you not only escape overspending, but provides the information necessary for devising a debt repayment strategy.
"Get it down on paper," she said. "Write down what you owe. Look at it realistically, ‘Here's what I owe, now, what am I going to do about it?'"
Nip and tuck
There are numerous ways to give up little expenses or make a little money, which can add up to big savings in a hurry. And this surplus of money can instead go toward retiring that credit card debt.
"Make lifestyle cutbacks," said Ogle.
She recommended forgoing certain luxuries, such as caller ID phone service or additional cable TV channels.
"There are a lot of things people can do to save money that would really free up some extra resources," said Ogle.
Daugherty advises young adults to shop at second-hand stores; look for student discounts; walk or bike rather than drive; and even get another part-time job.
Start saving
Invariably, when the balance on a pesky credit card account is finally about to disappear, some unexpected catastrophe is lurking nearby.
That's why experts offer some "old school" advice for sidestepping the credit card in times of emergency: Save some money for a rainy day.
"If they had the same amount of cash on hand (for an emergency), that would be a lot safer," said Ogle.
Alternative plastic
Credit cards used to be the only option for certain purchases and transactions, such as buying concert tickets online or making hotel reservations over the phone.
But now, debit cards and prepaid cards work almost universally in place of credit cards, said Daugherty.
"These alternatives help keep the debt from accumulating," she said.
Ogle said, "If you can use a credit card for it, you can use a debit card for it."
Contact Nathaniel West at nwest@jg-tc.com or 238-6860.
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