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Debt Management

Credit Counseling

Budget Basics

Debt-Busting 101

Debt. That four-letter word is the monkey on the backs of many American consumers.

By Peralte C. Paul
Times-Union business writer
Sunday, May 14, 2000

Every year, millions of people perform a dizzying juggling act with their finances -- credit cards, mortgages, student loans, take your pick -- robbing the proverbial Peter to pay Paul. Some go to credit counseling agencies and try to sort it out professionally.

Others simply give up and declare bankruptcy. Not everyone who has a debt problem is on the brink of disaster, financial planners and consumer advocates say. But if you recognize that there's a problem, it's best to take steps to keep it from festering into a much larger calamity.

The first thing to do is make a budget and plan for how you want to pay your way out of debt, says Dawn Lockhart, head of the Jacksonville arm of the Consumer Credit Counseling Service, a national non-profit agency that helps consumers plan financial strategies for getting out of debt.

It may seem simple, but she and other finance experts say that if you think you're in trouble, tracking how much money you spend vs. how much you take in is the only way you'll be able to see where you're bleeding money.

"Track your expenses for 30 days," Lockhart says. "Get a feel for what you're spending your money on." Most consumers have a good idea of what their regular expenses will be, such as rent or mortgage payments, which don't fluctuate from month to month. And most have a fair idea of what to expect from bills that can vary, such as electric or telephone bills. It's what Lockhart refers to as the "other" expenses that gets many people into trouble.

Once you know where all that "other" money is going, that's where budgeting -- more importantly sticking to a budget -- really becomes critical, she and other experts say. "They can write a budget all day long but if they don't follow it, it's useless," says Howard S. Dvorkin, author of Give Me Some Credit --Nine Steps to Clean Credit.

"Whatever it costs you, live within your means," says Dvorkin, who is also president of Consolidated Counseling Services in Fort Lauderdale. "If you're carrying debt, you need to live as inexpensively as possible."

That doesn't mean wearing sackcloths and eating bread and water, but experts say it does mean recognizing the difference between needs and wants. "If you don't need it, don't buy it," Dvorkin says. And if you have to buy something, such as a car, you don't have to buy the newest model or one with the most gadgets. Consider buying a used vehicle, advisers say.

Some debts, such as a college loan or a mortgage, are considered good investments. Presumably, a college degree leads to better-paying jobs, and a house should increase in value.

But some loans -- and remember that every time you whip out the plastic when dining, you're taking out a loan -- aren't always in your best interest, especially if you're not disciplined enough to manage your finances, experts say. "That meal you got for $50 bucks, you might be paying for it 10 years down the road if you're carrying a balance," Dvorkin says.

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