Kids Off To College? Here’s How To Get Them Started With Credit

ahmxmt-woman-displaying-credit-cards-in-park-college-student-2How can you build good credit if no one will give you a credit card? This is the predicament many college students face. Generally, banks and credit card companies don’t want to take a risk on someone with no credit history. But, with no credit history, adults face extreme financial limitations that can affect all kinds of situations, including renting an apartment.

Getting one’s first credit card has become an even trickier process in recent years, but fortunately if parents are willing to help get their kids set up, it can be pretty simple.

“Due to the CARD act, it’s now prohibited for credit card companies to give credit cards to anyone under 21 unless they have their own income, or have a co-signer,” said Liran Amrany, the founder and CEO of Debitize. “For parents sending their kids off to college, it’s usually a good idea to offer yourself as a co-signer so your child can start building credit.”

In fact, it’s probably a good idea to take this step before your child is off to college. Vinay Bhaskara, co-founder of CollegeVine, strongly recommends adding kids to your credit card while they’re still at home. Essentially, the earlier one forms credit with a parent’s help, the sooner they can branch out on their own.

“In practice, establishing credit is a process that should actually start in high school, where the parent makes their child an authorized user on one or more of the parent’s cards,” said Bhaskara. “The student should spend a little bit each month to start building some credit history. After a few months, they can set up a student credit card with a small ($500-800) limit. From there, the student is off and running.”

If your child is already starting college in the fall and hasn’t yet forged a line of credit, you can still add them as an authorized user. Also, Bhaskara notes, your child will probably discover a bank on campus that can set them up with student credit accounts.This may also require your co-signature.

The earlier that young adults can form credit with a parent’s help, the sooner they can branch out on their own.

If your credit is decent, you shouldn’t have any issue adding your child to your credit card. The real challenge comes with making sure they understand the responsibility of having a credit card.

“Because the easiest way parents can help their children establish and build credit is to initially co-sign and/or open joint accounts, they must be willing to talk with their children honestly and openly about what they’re comfortable with in terms of spending by the student,” said Bhaskara. “Parents are also probably the most important source of personal finance knowledge for their children, so they must be comfortable with this concept.”

You’ll want to explain that if they’re attached to your credit card, any irresponsible actions can reflect poorly on you and the good credit history you’ve worked years to build. Also, you’ll want to set spending limits, if not through the credit card company, then through a verbal or written contract with your child.

Ideally, your child will be on your card for awhile, and then branch off to get his or her own credit card(s). It’s important to continue educating your kids at this point of independence. If they’ve built up good credit with your help, credit card offers are going to start pouring in, and young adults may be all too tempted by the deceptive promise of money at their fingertips.

“Money is already tight enough for college students, so while the thought of quick and easy money is appealing, the reality of 20 percent interest rates can be crippling, especially if you won’t be able to really start paying down balances until after graduation,” said Kristina Ellis, financial expert and author of How to Graduate Debt Free: The Best Strategies to Pay for College. “Teach them to be wise and very leery of the dangers of credit card debt.”

Ellis also stresses that under no conditions should students turn to credit cards to pay for college, as “in most cases, the benefits of spending on student credit cards don’t come close to the eventual costs.”

First Financial can help your college students build and establish credit!* There are no balance transfer fees, no annual fees, and our cards are also equipped with an EMV chip for maximum security. To apply or for more information, please call 732.312.1500 Option 4, visit our website, or email info@firstffcu.com.

*APR varies from 11.15% to 18% when you open your account based on your credit worthiness. This APR is for purchases, balance transfers, and cash advances and will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of 1% of advance ($5 minimum and $25 maximum), Late Payment Fee of up to $25, Foreign Transaction Fee of 1% plus foreign exchange rate of transaction amount, $5 Card Replacement Fee, and Returned Payment Fee of up to $25. A First Financial membership is required to obtain a VISA Platinum Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties. Federally insured by NCUA.

Original article source courtesy of Nicole Audrey of NBC News.

5 Things You Should Never Put on a Credit Card

bigstock-Hands-holding-a-credit-card-an-71313301
Credit cards can seem convenient and actually benefit your finances when used correctly. However, there are times when it’s best to avoid using a credit card as it can contribute to debt. And, there are some things you should never put on a credit card.

It’s not uncommon for the average American household to have several thousands of dollars worth of revolving credit card debt to deal with, which can be crippling to overcome. Credit card interest rates are pretty high and are why you should only use your credit card to pay for affordable purchases that you can pay off in full each month.

To avoid the pitfalls of debt, here are 5 things you should never put on a credit card.

1. A Down Payment

If you are financing something and putting money down, it’s best to use your own cash instead of a credit card. Financing a big purchase like a vehicle is already creating debt that you have to pay back plus interest anyway. Financing the actual down payment too with your credit card could just create additional debt after the loan. Plus, it may be a key indicator that you can’t afford the item you are trying to finance.

While a lot of places won’t accept credit card payments due to the high fee the card company charges to process the transaction, some may allow it and there may be the option to utilize a cash advance through your credit card company. Even if the option is available, it’s almost always not worth it in the end. Instead, plan to save up over time to pay for large purchases in cash, or save up at least 20 percent of the total purchase price to put down as a down payment if you choose to finance.

2. Medical Bills

Paying off medical debt with a credit card is not usually a good choice. Credit cards are attached to daily or monthly interest rates while most medical debt is not. If you feel overwhelmed by your medical debt, you can try to consolidate it or work out a payment plan with your health care provider’s accounting department to avoid having your account go to collections.

As long as you are willing to pay back your medical debt, your provider should be flexible with establishing a monthly payment plan that you can afford. This way, you can pay off all your debt interest free without having to use a credit card.

3. College Tuition

Paying for college with credit cards it not a good alternative to taking out student loans. While your credit card may have a 0% intro APR offer for the first 12-14 months, if you don’t pay off the balance in full before that period is up, you will start paying interest on the balance. The interest rates for student loans is often lower than credit card interest rates, so charging the tuition for your college education on a credit card could actually cost you more money than taking out student loans would. Not to mention, maxing out your credit card or spending more than 30 percent of your total utilization could make your credit score decrease.

If you don’t qualify for government grants or federal or private student loans, you can always apply for scholarships, go to a local community college for your first two years of college and pay for tuition in cash with the help of a part-time job, or obtain a job with a company that will offer financial assistance for higher education. Companies like Starbucks and Best Buy offer to pay a portion of employees’ college tuition as long as they meet certain requirements.

4. A Vacation

With so many travel rewards credit cards out there, it’s important to remember that the golden rule of thumb is to only use a credit card to fund your vacation when you can pay the bill off in full at the end of your billing cycle.

Earning cash back and travel discounts and rewards for spending a certain amount of money on your credit card sounds great, but if you can’t afford to spend the money in the first place, the offer can do more harm than good. For example, how great would you feel if your week-long summer vacation left you with $5,000 in credit card debt but allowed you to earn a bonus of $500 for travel? You’d still be in quite a bit of debt which could spoil your entire travel experience.

Try opening up a high-yield savings account to save money for travel each month so you won’t have to go into debt just for a vacation.

First Financial offers a Summer Savings Account where you can put aside money to save for a vacation or general summer expenses. There are no minimum balance requirements and dividends are posted annually on balances of $100 or more. You can also elect to have either 50% transferred in July AND 50% transferred in August OR 100% transferred in July.* Click here to learn more about our Summer Savings Account today!

5. Your Dream Wedding

Again, a wedding is another life changing experience that you shouldn’t charge to your credit card if you know you won’t be able to handle paying the bill. Starting your new marriage off with debt will not feel good and will delay your family’s financial progress.

If you are planning a wedding and your budget is tight, consider lowering your wedding expenses by cutting corners, starting with non-necessities or traditions that aren’t important to you. Some couples have their wedding during the off season and on an unpopular day to save money while others go so far as to cut their guest list down or doing away with extra elements like flowers or a D.J.

Ultimately, when you focus on planning a wedding that reflects your vision, your budget, and what you value, you probably won’t have to pick up your credit card to charge pricey expenses at all.

Use Your Credit Cards Wisely

If you’re going to use a credit card regularly, it’s important to know your limits and use the card wisely. Make sure your spending is not exceeding 30 percent of your utilization each month and you’re making purchases for items you actually need and can pay for, not things that you will regret later.

First Financial’s Visa® Platinum Credit Card comes fully loaded with higher credit lines, lower APR, no annual fee, no balance transfer fees, 10 day grace period, CURewards redeemable for merchandise and travel and so much more!** Click here to apply online today.

*A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. Account-holder will elect to have either 50% of the funds transferred in July and 50% transferred in August OR 100% transferred in July. All Summer Savings funds are deposited into a First Financial Checking or Base Savings Account. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the program. Visit rstffcu.com to view full Rewards First program details, and to view the Tier Level Comparison Chart. Accounts for children age 13 and under are excluded from this program.

**APR varies from 11.15% to 18% when you open your account based on your credit worthiness. This APR is for purchases, balance transfers, and cash advances and will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of 1% of advance ($5 minimum and $25 maximum), Late Payment Fee of up to $25, Foreign Transaction Fee of 1% plus foreign exchange rate of transaction amount, $5 Card Replacement Fee, and Returned Payment Fee of up to $25. A First Financial membership is required to obtain a VISA Platinum Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

Original article source courtesy of Chonce Maddox of Lending Tree.

9 Ways to Get Your Finances Ready Before Having a Baby

Newborns don’t just come with that adorable new-baby smell and impossibly tiny toes — they also carry a hefty price tag. One of the most overwhelming challenges of parenthood is managing the many new costs, which seem to grow exponentially as your child does. If you’re planning to start a family, don’t panic. Here are the eight financial moves to make before becoming a parent.

1. Decide Where to Rein in Spending.

Knowing what your numbers look like is necessary to the planning-for-baby process. Leave out nothing: List all your assets, including your bank accounts, investments, and property. Get a clear picture of your debt, from car payments and credit cards to student loans and your mortgage. That way you have a starting point for your new financial plan.

Next, take a look at your budget (or set one up if you don’t have one) to cut back on unnecessary expenses. Now is the time to trim the fat in your spending, so reassess the costs you take for granted — like your cable or cell phone bills — to make sure you’re getting the best deals.

If you need to curb your spending, make realistic cuts that you can sustain. Otherwise, you’ll likely give up on your cost-saving measures.

2. Devise a Debt Action Plan.

With a baby on the way, it’s more important than ever to get serious about paying down your debt. It will only get harder to do as the expenses of raising a family pile up. Try:

  • The avalanche method: Kill your high-interest debt first — this is often credit card debt. Then continue down your list, tackling the highest interest rates first. This approach gives you the most bang for your buck financially.
  • The snowball method: Pay off your smallest debts first. Having a “win” under your belt early on can help give you the motivation you need to keep going.

You can also do a mix of the two strategies: Start with the snowball method and once you’re motivated by a zero balance, switch over to the avalanche. If you’re unsure of the best approach, you can also use an online calculator to help you strategize.

3. Build an Emergency Fund.

An emergency fund is crucial no matter where you are in life, but it’s even more vital when you become a parent. Conventional wisdom says your cash cushion should be around two to three months’ worth of expenses. Calculate what that means for you (rent/mortgage, food, bills, transportation, etc.), and then figure out what, and how long, it will take to get there. A savings calculator can help.

Padding your emergency fund generally should be secondary to paying off debt, because your debt’s interest can cost you over the long haul. But if you don’t have anything in the coffers, then you should work on both at the same time.

4. Budget for Baby.

Your budget isn’t written in stone; it should change as your life — and family — grows. Start crunching the numbers and adjusting as soon as you find out you’re expecting, or ideally, even earlier. You’ll need to add, at minimum, these basic expenses (based on national averages, which vary by location) into your new monthly budget:

  • Child care (at a daycare): About $972 a month
  • Disposable diapers: $30-$85 a month
  • Formula: $60-$100 a month
  • Clothing: $20-$50 a month

Note: If you want to save for college, you might consider a 529 college savings plan. For example, here is a hypothetical situation to help illustrate this point: To cover 25 percent of a public, four-year, in-state school, you’d need to save $109 a month starting when your child is born. (This assumes a 6 percent annual return and tuition rate of $201,386, which is what SavingforCollege.com predicts will be the average tuition in 18 years.)

If you would like to set up a no-cost consultation with First Financial’s Investment & Retirement Center to discuss setting up a 529 college savings plan or other savings products, contact us at 732.312.1564, email, or stop in to see us!*

5. Save for the Big-Ticket Baby Items.

There’s often a big up-front investment for new parents — babies require endless gear. You’re going to need a solid savings plan for those costs alone.

Depending on what’s right for your family, your up-front costs should include the following (these are based on the national average costs, and may vary according to your location or brand):

  • Crib: $120-$850
  • Changing table: $80-$250
  • Car seat: $80-$300
  • Stroller: $70-$900
  • Diaper bag: $25-$200
  • Playpen: $59-$150
  • Swing: $85-$120
  • High chair: $60-$250
  • Bottles: $50-$100
  • Monitor: $40-$60

Remember that people love to give baby gifts, so you may be able to register for many of these items and take them out of your budget.

6. Pump HR for Information.

If you’re expecting, or even just considering having kids soon, talk to HR as soon as possible. In order to fully understand what your leave will look like, find out:

  • The pay policy for parental leave.
  • Whether you can combine your leave with paid time off.
  • Your company’s long-term disability policy, and whether it can be applied to your leave.
  • The benefits entitled to adoptive parents.
  • How long your job is secure.
  • What forms you need to fill out to take leave.
  • Who is going to cover your duties while you are away.
  • The options for transitioning back to work — can you work part-time or telecommute to on-ramp?
  • Finally, get a sense of the insurance changes that will come with parenthood. Find out when and how to add your baby to your health care plan, and see whether your insurance allows you to contribute to a Flexible Spending Account/Health Savings Account or a Dependent Care FSA.

7. Get Your Legal Ducks in a Row.

No one likes to think about these sorts of things, but if you and your partner (if you have one) were to pass away, your estate would go to court for a lengthy process that can cost somewhere in the neighborhood of 5 percent of your assets.

To get your house in order, some of the documents you should consider having include a will, a power of attorney, and a health care proxy. This may save your heirs from having to make difficult decisions for you and help ensure that they’re taken care of: Wills clarify how you want to distribute your property after death, and they declare a legal guardian for your children. Power of attorney gives authority to another person to make decisions on your behalf about your property or finances. A health care proxy lays out who will make medical decisions for you if you can’t make them for yourself. Make sure you have both primary and contingent beneficiaries listed on all of these so that your wishes are as clear as possible.

You also should consider creating a living trust — a legal document that provides lifetime and after-death property management and lets you transfer assets easily. A living trust is a revocable trust, meaning it can be dissolved or changed at any time. Living trusts are especially helpful for parents of young children: You can include specific instructions within the trust, like how and when your assets will be transferred if you die before you children become legal adults (18 or 21, depending on the state).

8. Know Your Tax Breaks.

Having a kid comes with tons of benefits — unending love and (hopefully) someone to take care of you in your golden years, to name a few. But don’t overlook the concrete tax benefits that you can get as well. These include:

  • $4,000 for an additional dependent exemption.
  • $1,000 for the Child Tax Credit until the child turns 17.
  • $3,000 per child or up to 20 percent of qualifying costs for the Child and Dependent.
  • Care Credit (see a list of requirements for qualification).
  • $13,400 for the Adoption Credit.

Each deduction and credit has specific requirements, so be sure to double-check your eligibility. Fun fact: You can claim a full year’s worth of tax benefits even if your child is born on December 31.

It’s always a good idea to start saving for your child’s future as early as possible – open a First Step Kids Savings Account right here at First Financial!** There’s just a $5 minimum to open the account and no fees, PLUS they’ll earn dividends on balances over $100. Stop by any branch location and we’ll help you get started!

*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

**As of 12/12/2012, the First Step Kids Account has an annual percentage yield of 0.05% on balances of $100.00 and more. The dividend rate may change after the account is opened. Parent or guardian must bring both the child’s birth certificate and social security card when opening a First Step Kids Account at any branch location.  Parent or guardian will be a joint owner and must also bring their identification. A First Financial Membership is open to anyone who lives, works, worships or attends school in Monmouth or Ocean Counties.

Original article source by Steve Taylor of TIME Money.

Millennials: How You Can Avoid Credit Pain

bigstock-Young-Business-Man-Under-Stres-89718578-e1446206462272Millennials think they know a lot about credit. But the numbers tell a different story.

More than 7 in 10 millennials said they feel confident about their credit knowledge, according to a recent survey by Experian. If fact, millennials on average estimated they had a score of 654. But it turns out that for many 18-to-34-year-olds, even that was an overestimation. And millennials are less likely to check their credit reports, Experian said.

Here’s how it works: Thirty-five percent of your credit score is determined by your payment history, or whether you have made payments on time, 30% is your credit utilization, or the amount borrowed compared to the total credit available, 15% is determined by the length of your credit history, 10% comes from the number of applications for new credit and 10% is from the types of credit you have (i.e. revolving, installment, mortgage etc.).

Generally, credit companies prefer a mix of credit because the variety suggests you know how to use credit responsibly. A combination of car and student loans along with some credit card use, for example, helps build up your credit score as long as you pay on time over an extended period.

Scores range from 300 to 850. If your score is above 750, you’re considered to have excellent credit, which paves the way to the lowest interest rates and a better chance of getting approved for loans. If your score is on the lower side, it can cost you — that means higher interest rates on everything from credit cards to auto loans.

Here’s the breakdown:

800+ = exceptional
740-799 = very good
670-739 = good
580-699 = fair
Below 580 = poor

Financial advisors warn that a bad score may even hurt your chances of getting a job. Employers have access to your score and can factor it in to their decisions. Your credit score is a reflection of you and if your credit is bad, it could inject some doubt about your ability to handle personal matters and business matters.

With a lower score – you may still get a loan, but you will likely have to put more money down as a down payment and pay a higher rate, which can be costly.

For example, having a score of 650 versus 760 can cost you $125 more a month on a 30-year fixed rate mortgage for a $200,000 loan, according to credit tracking firm CreditSesame.com. That’s $1,500 more a year, or $45,000 over the life of the loan.

You are entitled to a free report from the three credit bureaus (Experian, Equifax and TransUnion) once every 12 months from annualcreditreport.com

Experts suggest checking your report regularly. Once a year is sufficient to get a gauge on your number, and check for any errors, like an incorrect payment status or delinquencies that have since been remedied.

Remember to keep an eye on the debt-to-limit ratio. What you borrow compared to the total credit available, also known as your debt utilization ratio, counts for a whopping 30% of your credit score. A debt utilization ratio greater than 30% will have a negative effect.

If you are borrowing too much, start a debt repayment plan to lower the ratio as much as possible.

Ideally, credit cards should be paid in full at the end of each payment period to avoid sky high interest. Paying in full each month also demonstrates that you are a responsible borrower. This will help build up good credit and save you money since the faster you pay down debt, the less interest you’ll pay.

Even if you don’t pay off all of your debt right away, make sure you are always paying on time. Set up automatic payments to avoid late payments. A missed payment will also hurt your score.

Ultimately, a credit score is one of the most important numbers you have. In the long run, a bad score could raise the cost of a car or home loan, increase you credit card interest from a single digit to double digits or even deny you credit entirely.

Not only does a good credit score save you money by lowering interest rates, it’s a reflection of you and your personal matters. So it is worth putting in the time to build up a good report. A credit score is one of the building blocks of your financial future and that has a big bearing on your entire life.

*Original article source written by Landon Dowdy of USA Today.

A Simple Guide to Paying Off Lingering Debt

www.usnewsIf you find yourself collecting more and more debt while struggling to figure out how you will ever pay it all off, it might be time to develop a step-by-step strategy. Paying off debt starts with making a budget and continues with changing your habits and rewarding yourself for progress. A few contributors to the U.S. News My Money blog offer a guide to get rid of the debt that’s been following you around for too long:

1. Create a budget.

“The first step to solving your debt problem is to establish a budget,” says Money Crashers contributor David Bakke.​ You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs. “If you don’t scale back your spending, you’ll dig yourself into a deeper hole,” Bakke warns.

2. Pay off the most expensive debt first.

Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. “By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards,” says retail analyst Hitha Prabhakar.

3. Pay more than the minimum balance.

To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. “Paying the minimum – usually 2 to 3 percent of the outstanding balance – only prolongs a debt payoff strategy,” Prabhakar says. “Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments.” Or if your minimum payment is $100, try doubling it and paying off $200 or more.

4. Take advantage of balance transfers.

If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Trent Hamm, ​founder of TheSimpleDollar.com, recommends moving the debt to a card that offers a zero-interest balance transfer. “You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate,” he warns. “If you do it carefully, you can save hundreds on interest this way.”

5. Halt your credit card spending.

Want to stop accumulating debt? Remove all credit cards from your wallet, and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi.​ “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she says.

6. Put work bonuses toward debt.

If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. “Avoid the temptation to spend that bonus on a vacation or other luxury purchase,” Karimi says. It’s more important to fix your financial situation than own the latest designer bag.

7. Delete credit card information from online stores.

If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don’t need. So clear that information. “If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account,” Hamm suggests.

8. Sell unwanted gifts and household items.

Have any birthday gifts or old wedding presents collecting dust in your closet? Search through your home, and look for items you can sell on eBay or Craigslist. “Do some research to make sure you list these items at a fair and reasonable price,” Karimi says. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible.” Any profits from sales should go toward your debt.

9. Change your habits.

“Your daily habits and routines are the reason you got into this mess,” Hamm says. “Spend some time thinking about how you spend money each day, each week and each month.” Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Or perhaps you can start cooking more at home. Ask yourself: What can I change without sacrificing my lifestyle too much?

10. Reward yourself when you reach milestones.

You won’t pay down your debt any faster if you view it as a form of punishment. So reward yourself when you reach debt payoff goals. “The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated,” Bakke says. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. “If you aim to reduce your credit card debt from $10,000 to $5,000 in two months,” Bakke says, “give yourself more than a pat on the back when you do it.”

Don’t forget about First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

*Article source written by Stephanie Steinburg of US News.

Frequently In Debt? Discover Your Personal Pitfalls

DebtManagement1.jpgYou don’t have to be a reckless spender to find yourself in debt. CNN touts that “one in three American adults have debt in collections.”

An Urban Institute study reported that 77 million people are so severely in debt that their account has gone to collections, while a Detroit Free Press article warns, “Young adults have more credit card debt than savings.”

Regardless of the angle, debt, severe debt – it’s an American epidemic.

So, how do you climb out of debt once and for all? Especially if you notice a recurring theme of continual debt-to-safety-to-debt wheel of fate, it is important to stop and analyze the causes for initial debt and the reasons for apparent insurmountable financial disease.

As with your medical health, financial heath is propelled by lots of hard work, dedication and realistic awareness. Denial will only perpetuate decaying health, physically or financially.

Step One: Take an honest assessment of your financial situation.

Before you can make a plan for diminishing debt once and for all, you have to understand the severity and expanse of the situation. Take into account all loans: student debt, mortgages and car payments. Know exactly how many credit cards you and your family have – make sure to count retail cards and reward cards in addition to traditional credit cards. Any plastic that can hold a debt/requires payment needs to be acknowledged forthright. Finally, collect all bills: anything that requires a payment plan or regular payment must be added into the mix. When you’re in debt, every $100 medical bill, $25 late fee for utilities or billed car repair must be accounted for.

Step Two: Take responsibility.

Playing the blame game or lying to yourself will not change the circumstances. Nobody cares if you don’t think it’s your fault. You owe the money. You have to pay the money. You can’t talk your way out of substantial debt. Take credit for your own shortcomings and accept the situation.

Step Three: Educate yourself and your family.

Money management is not an innate human skill. We are not born knowing how to allot, predict, and plan with 100 percent accuracy. And, sometimes, it is due to sheer ignorance that adults find themselves in debt. Whether or not a lack of financial education or money illiteracy is the root cause, understanding how credit works and how to budget are both beneficial life skills.

Step Four: Set realistic goals, with the end result being permanently digging yourself out of debt.

Each step should be attainable and based on practicality. However, do not fall into the mindset that “it’s going to take too long, so it’s not worth it.” Keep your eyes on the goal, but use baby steps to get there if necessary.

A good thing to do is to create a visual aid for you to help you along, like a financial plan. The important thing to remember is that your plan is a guide, not a crutch. It is a tool to keep you on track. Like any good guide, though, it can be tweaked to meet your needs and adjusted based on what obstacles you encounter on your journey to financial security.

Step Five: Perseverance.

It’s not an easy path. It’s not fun. The journey is oftentimes downright painful. But, avoidance and half-hearted efforts will not grant you the ability to squeak by. Debt can affect marriage, stress levels, relationships, and your future, but people often aren’t motivated enough to make a change. Many times, just climbing out of debt is not the largest challenge, it’s maintaining the healthy financial security that is attained through a debt-free life.

Don’t forget about First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

*Original article source written by Joe Young of Nasdaq.