EXTENSION REPORT

Alabama Cooperative Extension System/                                                                                                                            Gloria Musson                                                         

Baldwin County Office                                                                                                                                              Regional Extension Agent

302A Byrne Street                                                                                                                                   Consumer Science & Personal Financial Management                    

Bay Minette, AL  36507                                                                                                                                                            June 20, 2006           

Recently I participated in an event at a large industry where I was able to talk with about 200 associates (employees).  I had an exhibit promoting family financial management and I distributed Extension’s Money Management Calendar (HE-493-F) and Records and Important Papers (HE-351).  Discussing the contents of those two publications with such a diverse group as the ones who stopped by the exhibit really helped me to get a better idea about the financial concerns of families in our area.

Almost everyone had comments or questions about getting out of debt.  Most of the younger associates were anxious about not being able to save money.  As I see it, these two concerns are closely interrelated. 

Using credit is so easy that we fall into the trap of believing we can “have it all, right now!”  Before we know it, we don’t have enough money available to meet our needs without using more credit.  When this happens, we think we can’t put money aside for savings as long as we have all this debt.  It becomes a vicious circle.

Warning signs of too much debt are often listed in magazine or newspaper articles.  I’ll list some again as a reminder, but I think most people know when they have too much debt because of the stress or tension they feel when taking care of their finances.

Signs of too much debt:

Charging items that used to be cash purchases

Making only the minimum payments

Skipping payments when allowed

Requesting increases in credit limits

Being turned down for credit

Consolidating loans

Considering filing for bankruptcy

If you determine that it is time to start reducing your personal debt, there are several methods that may work for you.  The first step is to start tracking your spending and set up a spending plan.  Once you have determined how much money you have to pay toward debts you can put that in your plan and leave it there until all debts are paid.  If you discover that the amount you have for paying toward debt is not enough to pay all minimum payments you need to get help from a reputable credit counseling agency.

If you can meet the minimum payments and have some additional money, then you must STOP using credit and start paying the minimum payments on all debts and the minimum plus some extra on the debt with the smallest balance.  When that one is paid use all of the money you have from that bill to pay on the bill with the next largest balance.  Continue this procedure until you have paid off all consumer  debts. 

There are other methods that might work better for some individuals such as paying off debts with the shortest amount of time left on the payment schedule or paying the accounts with the largest interest rates first.  Regardless of the method that you choose, it must be part of the overall spending plan.  To get debt free may take quite a while and a lot of patience and perseverance, but the boost in confidence and the feeling of freedom that comes with paying off obligations makes it all worthwhile.

A very important part of that spending plan is to start a saving plan.  While paying off large debts it may be difficult to find “extra” money to save; therefore, it is important to write an amount into the expenses just as though it is a payment on a debt (it really is   because you are paying yourself first).  As the small amounts begin to build and you get the debt load under control you will begin to feel much less stress and tension about the family finances.

At that point you may be one of the few who can approach a financial management exhibit and say, “ I’ve got it under control!!”

For more information, visit our website at www.aces.edu for the publication, “You Can Be Debt Free” (HE-716) and “Saving for Retirement and Financial Emergencies” (HE-736).  If you have a question, please call me at (251) 654-4490 (cell).

Email address: gmusson@aces.edu

Phone: 937-7176 or 943-5611, 928-0860, ext. 2222

Issued in furtherance of Cooperative Extension work in agriculture and home economics, Acts of May 8 and June 30, 1914, and other related acts, in cooperation with the U.S. Department of Agriculture. The Alabama Cooperative Extension System (Alabama A&M University and Auburn University) offers educational programs, materials, and equal opportunity employment to all people without regard to race, color, national origin, religion, sex, age, veteran status, or disability.