To become financially fit is easier said than done. According to data from the Federal Reserve, consumer credit card debt increased by $6.5 billion in the third quarter of 2010. When not used wisely, debt can block your daily needs, create stress and reduce your ability to get credit at favorable interest rates or not at all. If your debt burden is more than 40 percent of your gross income, it’s time to come up with a strategy to pay it down. The greatest challenge is deciding how and where to begin. Below are some points to consider so you can develop a plan of action now.
Follow Your Money
- Start tracking where and how every penny and dollar is spent. A budget or spending plan puts it all out there so you can focus more clearly on reducing and eliminating debt.
- Set short-term achievable goals that you can accomplish in three months or less. After you have success, expand into longer-term goals that focus on financial security and sustainability.
- When you know where your money is going, you can make better spending decisions based on needs instead of wants.
Stop Spending What You Don’t Have
- To learn the true cost of spending, set aside a week or more in which you do not use credit cards, or make ATM withdrawals that are not free, only use cash. By giving credit cards or ATM usage fees the cold shoulder, you will be in a better position to resist temptation and impulse buying. Cash is the best budgeting tool you can use because once it’s gone, you stop spending.
- When you use cash, there are no fees, interest or overdraft charges. If you overdraw a debit card you will have to pay overdraft charges if you don’t opt out, and you will have to pay finance charges on unpaid balances on credit cards.
- Using a credit card is like getting a loan. If you only pay the minimum, you may end up paying much more than you charged. To develop a plan to pay off credit card debt faster, check out the credit card calculator from the Federal Trade Commission.
Make Your Money Grow
- Pay yourself first by saving each time you get paid, get a monetary gift or a pay increase.
- Try direct deposit or other automatic saving options to develop this healthy habit.
- If you can’t find money to dedicate to savings, consider using the boost in your paycheck from the 2011 payroll tax reduction to start or increase your saving. Details about this tax cut are available from the Internal Revenue Service.
Get Your Credit Report
- Your credit report, which outlines your loan and bill payment history, is used by financial institutions and other potential creditors to make decisions about your ability to repay debt. Information in this report can affect your ability to get a job, a loan, a credit card or insurance.
- You need to get a copy of your credit report from each of the three credit reporting agencies each year to check for errors, inaccurate information, identity theft or other fraud.
- The Federal Trade Commission is the only legitimate site to get a free annual credit report.
- After you get your credit report, contact Fairfax County’s Consumer Affairs if you have questions about what’s in your credit report or if you have a problem with a credit reporting agency that you are unable to resolve.
Don’t Wait To Start
- Visit the Financial Literacy Network of Northern Virginiafor information about public, private, and nonprofit financial education providers in Northern Virginia to find financial education services that are right for you.
- For tips, tools and information to keep you financially fit, 24/7, visit the Federal Trade Commission’s Money Matters.
- Classes also are offered to Fairfax County employees to help them achieve or expand their financial goals.
If being financially fit was easy, you would already be rich. Start now, your future is waiting!
Be Financially Fit in 2011