A U.K. study found that two thirds of kids 12 to 16 are worried about not having enough money in the future. The poll conducted by the Personal Finance Education Group, a charity focused on financial education, surveyed 1,000 kids between the ages of 12 to 16.
Will they have too much credit card debt?
Among the survey’s findings, 62 percent are worried about not having enough money and 30 percent worry about being in debt in the future. The poll also found that 77 percent of kids want to attend a university in the future, but half of them worried about getting a job later in life even if they get a degree.
Most of the kids polled (95 percent) said is important to learn to manage their money. Topping the list of the things they are most interested in learning about are: household bills, budgeting, saving, and the cost of having their own house of apartment, among other things.
Parents can teach children
Kids want to learn about handling money, avoiding credit card debt and other financial information. Much of what they will learn about handling money is likely to come from watching their parents. So if you are a parent and have a lot of credit card debt and other bills, it’s a good idea to start making some changes in your own financial behavior. Getting help with debt can allow you to form better financial habits that can be passed on to your kids.
If you aren’t sure where to start, it may be wise to find a reputable debt counseling firm. Finding debt solutions now can help you avoid even bigger problems down the line and put the steps in place for your kids to have a brighter financial future. As you work through your financial difficulties be open with your kids about your efforts to manage money more wisely.
Student loan defaults have become such a concern that one community college is now requiring students to complete personal budget worksheets in order to receive loans. Tidewater Community College, based in Norfolk, Va., wants students to outline a realistic picture of their financial situation before and after graduation, including a repayment plan for student loans, according to Inside Higher Ed.
Making students accountable
The move goes beyond requirements set forth by the U.S. Department of Education for receiving federal loans. The school hopes making students more accountable will help them make more responsible decisions about borrowing money for education expenses. Deborah DiCroce, president of Tidewater Community College, told Inside Higher Ed that student loans are “not a handout.” She went on to say:
It’s not something that goes away when the college experience is completed or not completed. There’s a commitment to repay a loan that has as much weight to it as any other kind of borrowing one might do. My concern, as we are ramping up our financial aid program, is keeping a close eye on our default rates, as one of our measures of accountability. It just became clear that we needed to take a step beyond what the feds require. Where is our responsibility to educate a borrower on this type of investment?
Looking for debt solutions
Many students need debt help because of high student loan balances they can’t pay back. Not only are many recent graduates having a tough time finding jobs that allow them to afford student loan payments, but they are also carrying high levels of credit card debt.
Tidewater Community College has the right idea with having students put together a financial plan that involves paying back any money borrowed. More students need to be educated about the consequences of taking on student loan debt and combining it with high-interest credit card debt, auto loans, etc.
Yes, some creditors may be willing agree to a debt settlement, but doing so isn’t always the right strategy for everyone. Make sure you weigh all the pros and cons to get the best results for your situation.
DIY vs. debt settlement programs
Most people consider signing up for a debt settlement program because they aren’t sure where to begin with wiping out credit card debt and other bills. Using one of these services usually requires you to make payments into an account with the firm for a period of two to three years, and the funds that accumulate are used to pay off debt.
While some debt settlement programs do exactly what they advertise, there are many accounts of consumers being duped and left with unpaid bills. Research any debt settlement program you are considering to make sure it is reputable and has a good track record.
Savvy consumers should be able to skip the middleman–a debt counseling firm–and negotiate a debt settlement directly with creditors. It may take several attempts to reach the individual who is authorized to approve a deal, so it pays to be persistent. Also, don’t expect to get a debt settlement unless you are at least two months behind on your payments.
Pros and cons for debt settlement
The upside to settling debt is that you can get a portion of your credit card debt wiped out. In some situations creditors may be willing to waive up to 50 percent or more of your debt. Generally, you’ll need to offer up some sort of lump sum payment, but there may be situations where a payment plan might be set up. But paying off a smaller percentage of debt can lessen the amount of interest paid out over time.
The downside to striking a deal is that you may still owe taxes on the forgiven debt. If you owe a significant amount of debt, talk with a tax adviser to get an idea of how big the tax hit may be.
Many young people are unable to get private student loans without a cosigner. Their parents may step in to help them get the loans the need, but end up putting their own financial security at risk. Here are some things you should think about when weighing the pros and cons of co-signing for student loans.
Federal vs. private student loans
Your kid should always apply for federal student loans before turning to private loans. Federal loans such as the Perkins or Stafford are not based on credit scores, so there is no credit check. Students also do not need a cosigner to qualify for federal aid. However, private student loans do require a credit check, and your student probably won’t qualify without a cosigner. Depending on the lender the borrower may be required to get a cosigner even with a healthy income and credit score.
Parents’ financial profile
As a parent you should ask some questions about your financial situation–now and in the future. Use the following questions as a starting point:
- Do you have a lot of credit card debt and other bills?
- Are you having trouble making your mortgage payments?
- Are you worried about your future job security?
- Have you experienced a recent drop in income?
- Is it difficult to make your income stretch between paychecks?
- Have you saved a substantial amount for retirement?
Do you need debt help?
If you are already struggling to handle all your household expenses, co-signing for a student loan is probably not a good idea–if you can even qualify. If Junior defaults on a loan, as the cosigner you would be responsible for paying it back. Many recent graduates are coming out of school with no job prospects in sight, and that could happen to your kid as well. So think about whether heaping a student loan payment on top of all your other obligations would push you to a financial breaking point. If your finances are too out of control, it may be time to get help with debt from a debt counseling firm.
Experian, a credit bureau specializing in consumer credit reporting, scoring and financial services, released a survey indicating that San Antonio, Texas is the city with the most per capita consumer credit card debt with an average of $ 5,177 in credit card debt as compared to the national average of $4,200 as of December 2010. The survey only considered balances on bank issued credit cards; cards issued by retail establishments weren’t included in the survey. Although survey results provide entertaining reading, they don’t help much if you’re drowning in credit card debt.
Finding debt solutions requires understanding the problem
Whether you live in San Antonio or Kalamazoo doesn’t matter if you can’t see past the pile of bills and late notices piling up. If you’re in trouble with credit card debt, it’s important to uncover the underlying reasons. Debtors Anonymous, a self help group, suggests signs of addictive spending:
- Not knowing where you stand financially: You don’t balance your checkbook or monitor your credit card balances. You continue spending with the hope that you have enough cash or credit to cover your purchases.
- Living for today and not worrying about tomorrow: Failing to budget for predictable expenses such as health care, taxes and other non-recurring but expected expenses.
- Difficulty meeting basic obligations: Do you put off paying your rent or mortgage until the last minute? Have you borrowed money to pay for groceries, or used credit card cash advances to pay utilities or rent? When you pay all of your basic expenses in a timely manner, do you feel as though you’ve accomplished something extraordinary?
- Debt brings drama: Are you always wondering how you’ll pay your bills, or robbing Peter to pay Paul? Are you frequently in crisis mode with money?
- Gaining a sense of status when using credit cards: Credit card ads succeed in convincing many consumers that carrying (and using) their cards is prestigious, and that carrying a piece of plastic named after a precious metal is somehow admirable. Wake up call: A credit card is a piece of plastic that functions as a financial tool when used responsibly or that can ruin your life if not used with care.
Don’t be afraid to admit that you need debt help. Depending on your situation, you may find help from sources including debt consolidation loans, consumer credit counseling and debt consolidation services, or through consulting a bankruptcy attorney. Facing debt problems and finding debt help today is your first step toward achieving financial security.
The Federal Reserve reports that although consumer debt levels are increasing, which indicates more consumer spending, credit card debt levels are falling. As of January 2011, consumer debt increased to $2.412 trillion, the fourth consecutive monthly increase. Credit card debt decreased by $4.2 billion or 6.4 percent during January. Although some of the decrease could reflect issuer charge offs or consumer bankruptcy filings, it’s also likely that consumers are learning the lesson that carrying high cost revolving debt is similar to being stuck on a high-speed hamster wheel. If you’re ready to free yourself from the cycle of incurring credit card debt and paying high interest and penalties, here are some tips for succesful debt management.
Managing credit card debt: no instant success
- Understand that debt doesn’t go away over night: Falling into a financial hole is easier than digging your way out. Your commitment to eliminating credit card debt is required for success.
- Establishing and writing down your goal: Review your credit card balances, make a list of them and set a goal for becoming debt free. It’s important to be realistic and plan your debt repayment schedule based on existing income. Don’t count on the lottery, your relatives or a windfall to bail you out of credit card debt.
- Apply all “found money” toward your debt: Tax refunds, raises, bonuses, funds from garage sales and online auctions can help you reduce your debt faster. That jar of change you’ve been saving for years? Take it to the bank and pay down your debt.
- Change your spending habits: Don’t carry credit cards in your wallet. If you have to consciously seek out a credit card before shopping, you may think twice about using it. You can use debit cards with major credit card logos anywhere that credit cards are accepted. Knowing your expenditures are coming out of your checking account can help you put the brakes on impulsive spending.
- Cooling off before buying: It’s not realistic to expect that you won’t engage in any discretionary spending, but try to enforce a “cooling off period” before purchasing items you want rather than need. Think about it overnight, review your debt management plan and ask yourself if $150 for a new pair of shoes would be better applied toward reducing credit card debt.
- Engaging the support of friends and family members can help you stay on track. Suggest alternative activities to recreational shopping and “girls day at the mall.”
The newly formed government agency, U.S. Consumer Finance Protection Bureau, reports that the Credit Card Accountability, Responsibility, and Disclosure (CARD)Act has caused the U.S. credit card industry to revise policies while reducing and eliminating some penalty fees. Highlights of the report include:
- Over-limit fees have all but disappeared.
- Prior to the CARD Act, 15 percent of credit card issuers reset credit card interest rates annually, but now approximately 2 percent of issuers are resetting interest rates each year.
- Assessed late payment fees fell to $427 million in December 2010. This represents a decrease of more than half of the January 2010 amount of $901 million.
- Since the inception of the CARD Act, credit card late fees have fallen from an average of $35.00 to $23.00.
These developments are a step in the right direction toward helping consumers with debt management. Here are some tips for applying CARD Act principles to your own credit card debt.
CARD Act: Gaining personal control over credit card debt
Credit cards: Evaluate your credit card accounts and usage. Reduce the finance charges you’re paying by using a debt consolidation loan or transferring high cost balances to lower cost accounts.
Accountability: Understanding how and why you got into debt can help you find debt solutions appropriate to your situation. Taking responsibility for your debt doesn’t require being your own loudest critic, but it does require being honest with yourself and seeking debt help if needed.
Responsibility: Taking control of your finances by establishing a cash-based budget and an affordable debt management plan is essential to gaining freedom from debt. While acknowledging past mistakes, focus on your new budget and debt management plan for eliminating credit card debt.
Disclosure: No, you don’t have to tell your neighbors that you’re awash in a sea of debt, but “disclosing” to yourself how much you owe, what it costs and understanding how credit card debt compromises financial security is an important step in the process of managing, reducing, and eliminating debt.
High finance charges and penalty fees can rapidly cause credit card debt to expand out of control. If you need debt help, consider talking with a financial advisor or consumer credit counseling service. Debt consolidation and credit counseling services can help you develop a budget, and may negotiate affordable payment terms with credit card companies. Avoid scams by checking out debt help services with the Better Business Bureau or other consumer advocacy service. Reputable debt help organizations typically offer free consultations and do not expect any payment until they have implemented a debt management plan for you, and you have agreed to all the terms of the plan.
Although “good” is a subjective term, we can clarify positives and negatives related to using debt consolidation as a method for debt management. Debt consolidation functions in a manner similar to refinancing a home mortgage; you’re trading one or more debts for a single new debt, typically one offering lower finance charges. Potential benefits associated with debt consolidation include:
- Streamlining debt management: Dealing with a stack of credit card bills and loan payments each month increases your chances of missing a payment. Credit card debt consolidation can help by rolling several balances into one.
- Cleaning house, and your head: If you’re stressing due to debt, using debt consolidation can help you regain some feeling of control. Paying off multiple debts with a debt consolidation loan or consumer credit counseling can eliminate problems with debt collectors calling you at home and work, along with helping you focus on paying off your debt consolidation balance in place of several credit card debts with changing balances and finance charges.
- Lower finance charges: When shopping debt consolidation loans, it’s important to compare the annual percentage rate (APR) for the debts you’re consolidating along with the APR for debt consolidation options you’re considering. Your goal is to consolidate debt to one account with a lower APR than the debts you’re consolidating. APR provides a more accurate estimate of actual debt costs because it includes interest rates, penalty fees and lender fees.
Debt management: Debt consolidation can help, or not
- Using your home for collateral: Unsecured debt consolidation loans can be difficult to find if you have bad credit. In today’s economic climate, with housing values declining, it may also be difficult to qualify for a home equity loan or line of credit with less than admirable credit. If your home has lost value, you may not have enough home equity to qualify for debt consolidation through home equity financing or refinancing your mortgage.
- Credit card balance transfers: Although these can be useful to consolidate a few low credit card balances, it’s easy to lose potential benefits if you fail to pay off your balance transfers prior to the expiration of the introductory period.
- More debt than before: This is a frightening scenario that can happen. Clearing up debts with a debt consolidation can provide a false sense of security which can lead to more debt. Credit card debt consolidation can lead to a vicious cycle of paying off, consolidating and incurring more debt.
Those struggling with debt can benefit from programs offered through non-profit debt consolidation programs. These programs can help you determine why you’re in debt, and establish debt management options through budgeting and affordable repayment plans.
The New York Times reports that Congress is gearing up to debate whether or not to increase the federal government’s debt ceiling. Hello? Isn’t it about time for our elected officials and so called leadership to start setting an example for we, the consumers? We are constantly reminded of the importance of financial prudence; meanwhile our government is spending like a fleet of drunken sailors. At some point, the government and debt-ridden consumers have to know when to say “when.” The government’s balance sheet is too big to tackle here, so let’s concentrate on reducing personal credit card debt.
Drowning in debt: Has this become America’s new favorite past time?
Recent reports of increased credit card usage among consumers seem to suggest a revival of consumer confidence, if not carelessness. Carrying credit card debt doesn’t make sense, particularly in uncertain economic times. Here are some reasons to think twice before running up credit card debt:
- Variable interest rates: Many credit cards carry variable interest rates, which can go up if the financial index the card is tied to increases.
- Minimum payments and unpaid interest: Minimum credit card payments typically do not cover all of the accrued interest, and unpaid amounts are added to your unpaid credit card debt.
- Finance charges: Although legislation has limited how and when credit card companies can impose penalty fees, these fees can add to your debt if you forget to make a payment or exceed your credit limit. If you incur a penalty fee for the first time, it’s worthwhile to call your credit card company and request a waiver of the fee.
- Job insecurity: Financial analysts and economists report that the economy is rebounding, but unemployment remains high. Carrying credit card debt takes a bite out of your budget that can be disastrous if you lose your job or your income is reduced.
- Temptation: Somehow paying with credit cards can lead to more spending. Avoid the temptation to spend lavishly or unnecessarily by carrying cash or a debit card instead of credit cards.
- Emergency savings: Relying on credit cards for emergencies can create costly debt. It’s important to establish and fund an emergency savings account. The amounts you’re paying toward credit card debt could have gone to savings instead of debt.
- Credit scores: Like it or not, credit scores can impact more than your ability to qualify for loans and credit. Employers and insurance carriers may check your credit scores as part of their approval processes. Although the bad economy has thrown a monkey wrench into the allegedly reliable models used by credit scoring companies to predict consumers’ creditworthiness and overall reliability, the system remains unchanged, and poor credit scores can create more than financial problems.
Seeking debt help is essential if you’re struggling with credit card debt. Contacting consumer credit counseling and debt consolidation programs is the first step toward finding affordable debt management solutions. Insurmountable debt causes physical and emotional stress, can strain interpersonal relationships and cause problems at work. Don’t wait. Please get the debt help you need today.
The problem with not having health insurance is that you don’t miss it until you need it. PBS reports that 44 million Americans are uninsured, and another 38 million are underinsured, which means they can face thousands of dollars in medical bills if they become ill. Any one of these circumstances can contribute to ruining your credit, your budget and your qualify of life. High deductibles and co-payments cause financial problems for families who cannot afford quality health coverage; about one third of the uninsured have problems meeting their bills, and this financial pressure causes many without adequate health coverage to put off seeing their doctors and other health care providers until they become seriously ill.
One hospital visit away from bankruptcy: Avoiding crushing medical debt
It’s important to get the care you need when you need it. Here are some tips for reducing and settling medical bills.
- Advise your care providers that you have no insurance, and ask about financial assistance programs. Hospital social workers and billing office personnel may refer you to programs for financial assistance or reduce your bill. You won’t know until you ask, so put pride aside and ask for the help you need.
- Contact billing agents and attempt to negotiate a repayment plan or settlement. Note payment dates, amounts and conversations regarding payment arrangements in writing. Provide all information requested to evaluate your ability to pay. Cooperate with medical billing personnel; they’re only doing their jobs and are more likely to help if you’re willing to listen and work toward a solution.
- Do pay what you can afford toward your medical bills. Making small payments can prevent having to deal with third party collectors.
- Do not tolerate threats or rudeness from collection agents. Health care providers often sell uncollectable debt to third party collection agencies, which can allow collectors to be rude and threatening when attempting to collect on unpaid bills. Ask collectors not to call you at work and terminate abusive calls.
- Contact a credit counseling and debt consolidation service for help. Non-profit consumer credit counseling and debt consolidation programs work with creditors to establish affordable repayment terms.
- Contact a debt settlement agent or attorney to make a final attempt at settling debt before filing bankruptcy. Debt settlement services negotiate with creditors to reduce the amounts you owe. Beware of debt settlement scams, and don’t pay any money up front for debt settlement services.
- When all else fails, contact a bankruptcy attorney. No one wants to file bankruptcy, but if you’re being threatened with wage garnishments, frozen bank accounts and you cannot meet your other expenses due to medical bills, you can seek relief under bankruptcy laws. Bankruptcy attorneys typically provide free consultations and can advise you of bankruptcy options. Although not an easy decision, please remember that bankruptcy is a legal means of eliminating or reducing insurmountable medical and credit card debt.
Gather the information you need from creditors, credit counselors and other financial advisors. Don’t be pressured into taking immediate action; take time to evaluate and compare options.