ESPAÑOL   |   ENGLISH

Do I need help?

Debt Management

Credit Counseling

Credit Basics

MAKING ENDS MEET Make plan to clear debt

BY SHARON HARVEY ROSENBERG
January 22, 2005 

January is nearly over and I've flipped through the first few weeks of my 2005 calendar with new resolve. Better debt management is my top priority for the next 11 months. The price tag is compelling.

High-cost debt is the hidden drain on our financial and emotional accounts, according to fiscal experts. Worries about spending or an overwhelming debt load reduce our productivity, create stress and erode our physical health. That's the word from credit experts at the Federal Trade Commission and debt counselors in South Florida.

''Most Americans walk a tightrope of debt,'' said Howard Dvorkin of Consolidated Credit Counseling Services in Fort Lauderdale. ``We are a society that is essentially hooked on debt.''

The average household with credit cards carries a revolving debt balance of $8,000 to $9,000. According to the Federal Reserve, the average U.S. consumer owes $7,296, with many owing more than their annual income.

But unexpected life events often disrupt our high-wire credit dance. Indeed, financial pressure is the leading cause of divorce, said Dvorkin. On its website ( consolidated credit.org), Consolidated Credit Counseling Services offers a free kit called ''Budgeting Made Easy,'' a tool for debt relief.

''Consumers with large credit card balances may not recognize how much stress is created from carrying that much debt,'' said Jessica Cecere, president of Consumer Credit Counseling Service of Palm Beach County/Treasure Coast.

The numbers are sobering: A $1,000 shopping spree will cost an additional $1,000 if you pay only $20 a month to the credit card company over 10 years, according to the FTC. And long after the new CDs have been scratched and the clothes given away, you may still be paying for them.

''People really have to make serious adjustments [in spending habits] and look at the long term,'' says David L. Wilson, a Miami financial consultant. ``The key issue today is budgeting.''

To get a handle on debt, Wilson and the credit counselors at CCCS urge you to calculate your total debt. Next, create a repayment plan based on your income and realistic expense reductions. Your financial makeover will be easier if you avoid shopping sprees and impulse purchases. Make a pact not to make any new purchases until you have a plan to pay off your current balance in 90 days or less.

Keep track of small purchases, recommends Dvorkin. Little things add up. For example, a daily $3 latte actually costs $780 a year. ''You don't need a latte. Go back and drink the free office coffee,'' Dvorkin said.

A cash-only policy will help you avoid credit card traps, according to Yes You Can Achieve Financial Independence, a new book by James E. Stowers, founder of American Century Investments. If you have good credit and you don't owe too much, you might be able to cut your costs and get a lower rate by transferring a balance to another card.

Stowers also recommends refinancing high-interest debt with new home-equity credit lines from your bank or mortgage company. But realize that if you don't pay that debt, your home is at risk, and the worst thing you can do is charge up your credit cards again.

After reducing expenses, review your progress and analyze your spending habits at least twice a month. Regular checkups -- reality checks -- will improve your health.