Using Credit Wisely,Avoiding Debt

What to look for, and what to consider!

Credit Statistics

40% of credit card holders carry balances less than 1,000…15% carry balances more than 10,000!

Credit Statistics

48% of consumers individually carry less than 5,000 dollars in debt, NOT including mortgage loans.

Credit Statistics

The average consumer has nearly 17,000 available to them at anytime on credit cards

Credit CAN help with your financial goals if…You identify your goal clearly,

“what do I want to buy with my credit?”

Gather information, “what are the credit terms, interest rate, length of time to pay off, minimum payment?”

Credit CAN help with your financial goals if…Examine alternatives, how

long would it take to save money and purchase, how much would you have to save each month, could you invest the money and reach your goal sooner?”

Credit CAN help with your financial goals if…Analyze outcomes, “do you

need the item right now, or can it wait, how will either option affect your budget and saving?”

Credit CAN help with your financial goals if…Make a decision, is credit the

BEST option for you in this place and time?”

Credit CAN help with your financial goals if…Evaluate you results; in

hindsight, did using credit or not using credit helped or hurt your situation; would you make the same decision again?

70-20-10 Rule:

It is generally agreed that you can keep your debt in check by dividing up your financial plan this way:

70% for living expenses20% for saving and investing10% for paying off your debt

Things to remember…

The higher the interest on your debt, the LONGER it will take to pay off

Making the minimum payment raises the cost of your purchases

Charging small “everyday” items will come back to haunt you!

Having too much available credit makes you look risky

Avoiding Pitfalls:

Read the fine print on ALL your credit applications, KNOW what you are getting involved in financially

Pay your bills early if you can; this way you will not have late payments

SAVE, SAVE, SAVE!!!

Record Keeping…

Holding onto receipts and financial papers will allow you to be aware of your current situation and if need be produce proof of purchases in case there is an issue.

I am in debt; what should I do?Put away the plastic, only use

cashMake a commitment to pay

all your debtsDon’t hide from your debt,

know how “bad” it is…Create a repayment plan

The Total Affects of Debt

FinancialEmotionalPhysicalSocial

Last Resort

Bankruptcy: a legal option for getting out of debt

Chapter 7-erasing most of your debt, easiest if you are unemployed or have little income.

Chapter 13- consolidates and takes the interest off your debt, still repay over time

Both of these options will cause you to have a 7-10 year period of financial hardship

Maxim: order of paying off debt Pay off the debt with the

highest interest firstOnce you have paid off your

first debt use that money to pay off your next obligation

This will snowball and pay your debt off faster!

Page 56 Exercise 4G

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