Creative Commons License photo credit: paalia

Shift Happens! You can’t pick up the paper, turn on the news or even hang out by the water cooler without some discussion of the government’s debt ceiling and how it will affect each of us. Consumer debt, just like the government spending, is a common topic of discussion and analysis in most households, but it should not be considered a way of life.

How can we get our own debt under control even while we standby and watch our government raise the debt ceiling? It’s like increasing the credit limit on a card, only to max out the card shortly after. Shift Happens!

For most consumers, the need to engage in debt consolidation is a sign they have been doing a poor job of managing their money. If they weren’t, it isn’t likely they would be so deeply in debt in the first place. Same with our government’s spending spree. They gave money to bail out the banks so banks would bail out consumers, but instead bank executives kept their salaries and bonus while bank consumer credit tightened.

One of the easiest ways to minimize your spending is the elimination or reduction in the use of your credit cards. Credit card abuse is one of the leading causes of consumer debt.

You should also consider a moratorium on new loans. Your debt consolidation loan was taken in order to get your debt under control. Taking out additional loans is counterproductive. Keep in mind that ‘loans’ include any scenario where you are racking up bills that require repayment at some point in the future. That is the very thing out government still proposes.

Ongoing debt minimization is critical to the long-term success of debt consolidation so why is our government still spending and loaning money that we don’t have available?

Here are a couple of suggestions:

  1. Start to reduce the balance on the credit cards with the highest interest. Pay down each card whenever possible. This will decrease the percentage of usage (or the ratio of the credit limit to what is currently owed), so that the credit bureaus reflect less usage. This will, in turn, help to raise your credit score. Paying the minimum due on credit-card bills will barely cover the interest and none of the principal. Minimum payments will take years to pay off your balance, and you may spend thousands of dollars more than the original amount you charged.
  2. Higher credit scores often mean a reduction in interest rate. Credit cards are a major factor in the credit scores. Pay them first and don’t reduce the mortgage any more than your monthly payment. Mortgage often have low interest and the first million in interest is deductible. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)
  3. Get real. Figure out what you owe per month, how much you make each month and get control of your spending and paying. Try to build a cash cushion worth three months to six months of living expenses, in case of an emergency. If you don’t have an emergency fund, a broken appliance or damaged car can seriously upset your finances.
  4. Contact each credit card company to investigate their ‘hardship’ programs. Often they will reduce or eliminate your interest rate for a period of time so that you can reduce interest payments and increase the amount applied to the balance.
  5. Cutout excess spending. Review all of your bills such as cable and wireless to determine what exactly you are paying for and if you really need all the services and features you currently use.
  6. Eat at home. Make coffee at home and take it with you using reusable mugs. Bring your lunch to work. Learn how to use leftovers and always take home a ‘doggie’ bag from any meal you eat away from home. The portions are often too large to consume at one sitting and the excess will provide another meal for you or someone else in your household.
  7. Set up a personal budget including your living expenses. You need to know what you spend per month in order to stay even and what you can add to the payments to reduce your overall debt.
  8. Review each and every credit card. Find ones that match your spending/paying habits. For instance, if you pay off the balance every month switch to a card with low fees, if you carry a balance obtain a low-rate card. Pay with cash. It will make the purchase more painful and remind you that credit cards are simply loans not gifts. Don’t use a credit card to pay for things you consume quickly, such as meals and vacations. And if you can’t afford to pay off your monthly bill in full in a month or two don’t buy it.
  9. Get control of your spending. Walk, bike or use public transportation, don’t drive. Rent movies rather than going to the movie theater. Learn to cook rather than buying prepared foods. If you use something often, buy in bulk. Calculate every purchase to compare cost/oz., shelf life, etc. Often advertised deals may actually cost more/unit. Almost every phone has a calculator–use it. Food that is on sale will often save your 30-50% for the same item that is put out that same day.
  10. Negotiate, negotiate, negotiate. Don’t be afraid to ask for a discount or a deal. After all, you’ll never get it if you don’t ask. Think of your debt ceiling as something that has to come down, not up. Every single month pay off more than you charge. Don’t be afraid. It’s time to stop spending and start paying. If all else fails seek a financial counselor. Some nonprofit groups have free debt counseling.

Everyone in this country is experiencing some form of Shift Happening to him or her. And as the lawmakers struggle with how to handle the debt ceiling, you must focus on your own debt and managing it – so it doesn’t manage you.

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