Editorial – Don't be paralyzed by debt, credit

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In these tough economic times, everyone is looking for ways to save a buck, make an extra buck or gain a financial edge.

But people need to be careful, too. That “edge” can slice you to ribbons if it’s in the form of a scam. That’s why reading the front-page story about scams in today’s paper is worth the time. People should also spread the message to their loved ones, especially the elderly who are often the target of a variety of cons and shakedowns.

Another way to weather the economic storm is to not be blindsided by crushing debt. It can happen to anyone: Credit card debt slowly builds; sudden unexpected expenses arise; a family member loses a job or has to take a cut in hours; an unforeseen illness or injury prevents you from earning a paycheck.

The Village Family Resource Center offers these tips to help families prevent debt paralysis:

•Don’t hide purchases from family members. Being dishonest about your spending not only leads to financial trouble, but also can strain your personal relationships. Because your financial situation often affects others, honesty is the best policy.

•Don’t apply for new credit cards simply because you’ve reached the credit limit on existing cards. When your cards are taken to the limit, it is time to pay off the balance and adjust your spending habits – not apply for more cards. Requesting a higher limit or opening new lines of credit potentially causes more harm than good. These situations only mask underlying financial problems.

•Don’t start charging when there is no money. If you have no money left after paying your bills, you may be headed for trouble. It’s not a good idea to routinely rely on your credit card to pay for living expenses when you don’t have the cash available. As a general rule, you should not be spending more than 20 percent of your take-home income on credit card bills or loans, and this includes your car payment.

•Make more than the minimum credit card payment. Financial counselors recommend paying at least double the minimum required payment. If you’re unable to pay more than the minimum, it’s a definite red flag.

•Reduce expenses wherever possible. Look for no or low-cost entertainment and cut back on other day-to-day spending. Consider bringing your lunch to work, substituting video rentals for frequent trips to the movie theater, or visiting the local library as a resource for the latest books and magazines. Small reductions in daily spending add up to big savings. Trimming $5 from your daily expenses adds up to more than $1,800 over the course of a year.

•Work with your creditors. If you encounter problems repaying your debts, contact the creditor immediately and explain the situation. Creditors often will work with you to come up with an alternate payment arrangement.

It’s easy to fall into the trap of ignoring a debt problem with the hope that it will fade away. But in reality, the problem will only get worse. Act now. It’s much easier to deal with credit trouble early on – before debt paralysis gains the upper hand.

Tags: opinion, editorial, debt, credit