This July 4th holiday, the National Foundation for Credit Counseling is challenging consumers to take charge of their money in an effort to gain financial independence.
How do you do this? The NFCC says you can declare your financial independence by making a commitment to become free from debt.
“The stress of unmanageable debt has destroyed marriages, shattered families and contributed to lost jobs. No one ever scripts financial ruin as a part of their life plan, but when financial distress occurs, it is a very real part of a person’s daily activities, as debt is a burden people carry with them 24 hours per day,†says Gail Cunningham, spokesperson for the NFCC, in a statement.
Here are some tips for slaying your debt demons:
Pay more than the minimum on credit cards: When you just pay the minimum on your cards, you’re not effectively chipping away at the debt. This approach will just prolong repayment and result in paying more interest. Here’s a great example from the NFCC:
“With a $10,000 credit card debt at 18 percent interest, even if a person never adds any purchases or fees to the account, and makes a monthly on-time payment of two percent of the balance, it will take them 48 years to become debt free. Further, that original debt of $10,000 will cost them $36,825, with $26,825 going toward interest.â€
So if you don’t want to end up in a situation like that, strive to pay more than the minimum. You’ll be happy you did.
Track spending: How can you know what to cut back unless you’re aware of what your spending? Note what you buy (and how much you pay for each item) in a notebook or Excel spreadsheet. Do this for at least a month. This will show you where you need to cut the fat.
Keep tabs on your credit report: Make an effort to regularly check your credit report for errors. You are entitled to receive one free credit report from each of the three major credit bureaus (Equifax, TransUnion, Experian) once a year. You can get your free reports at annualcreditreport.com.