Carrying Around Extra Debt?

Here are some strategies to lighten the load.

Economic experts may have different opinions on when the economic uncertainty in the American economy will end. They do, however, agree on what fueled our country’s worst recession since the Great Depression – people spending more than they can afford to spend. The numbers do not lie. There is been a growing trend in consumer debt, including credit card balances, mortgages and student loans.

If you are among the growing number of Americans who have accumulated debt, what can you do to get relief? The good news is that there are some important steps you can take.

Create a budget and stick to it. The first rule of thumb in consolidating debt is to take a closer look at your expenses and income. Are you spending more than you make? It may sound like a simple question, but most people do not know the answer. Write down all your expenses in a given month, to see where you are spending your money. Be sure to include the items you routinely pay cash for, such as coffee, vending machine items, movie tickets or rentals, etc. You may be surprised to see where your money is going. Once you have listed your expenses, look for ways to decrease them.

Then, establish a realistic budget and work to stay on it. If you want to spend more money on entertainment or clothing, figure out other expenses you can cut down, such as buying your lunch every day.

Stop using your credit cards. If you have significant credit card debt, as many Americans do, it may be time to change your habits. A great rule to follow is if you do not have the money to buy something in cash, do not buy it. Think about your purchases before you make them. Also, do not be lured in by 0% interest to buy something you want but do not really need. You still have to pay for the purchase, and if you do not pay off your balance before the interest-free period ends, you will end up paying for accrued interest.

Pay more than the monthly minimum on your credit cards. If you have revolving debt, such as credit cards or home equity lines of credit, be sure to pay more than your minimum payments. Thanks to new credit card regulations, you can now see how long it will take you to pay off your debt if you just pay the minimum. The extra money you pay will go directly toward the principal balance and will reduce the amount of interest you pay over time.

Pay a little more on your mortgage. If you have extra money, consider putting a few extra dollars on your mortgage each month. You may be surprised to learn that paying just an additional $50 per month on your mortgage can help you save thousands of dollars in interest charges over the life of your loan and help you take years off your mortgage term.

Consider refinancing. If there is anything good that has come out of the economic uncertainty, it is that mortgage rates have reached record lows, making this a great time to consider refinancing your home mortgage. With rates so low, you can possibly reduce the term of your mortgage and pay the same monthly payment. You can also consider rolling your higher-interest credit card debt into your mortgage. That way, you can take advantage of potential tax benefits, since mortgage interest is tax deductible. If you do decide to consolidate debt with your mortgage, do not make the mistake of taking on additional debt with credit cards or home equity lines. You will negate the benefits of refinancing.

Pay yourself first. In these challenging times, it is more important than ever for you to set aside money for savings. To make it easier, arrange automatic transfers from your checking account to your savings account. These can even be setup over the phone by calling 801.223.UCCU (8228).

There is no question that life is unpredictable. There are times when you might need to use your credit card to pay for unexpected or emergency expenses. Just remember to try and use your savings first and to work on putting as much money as you can toward reducing your debt. In the long run, it will pay off. If you have questions about where to begin, stop by any of our eighteen UCCU branch or give us a call at 801.223.UCCU (8228) to see how we can help you start eliminating some of that extra debt.

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