Times are tough, but you don’t have to let your debt mark you forever. If you’re among the 79% of undergrads who have credit cards, you’re part of a group carrying record-high credit balances. The average balance grew to $3,173 and 21% have balances of between $3,000 to $7,000. And this isn’t even including the more than $25,000 amassed in student debt!1 Is this really the way you pictured starting your life?
Proud and in Debt
According to researchers at Ohio State University, young adults feel empowered by their credit card and education debts. Seriously?! You feel empowered? “The more credit card and college loan debt 18- to 27-year-olds had, the more they felt like they were in control of their lives. Ironically, this is the generation that is expected to deal with an increasingly growing 14 trillion dollar national debt.”2
Don’t let your debt scar you. Get out now and stay out of debt. That’s the only way to really get ahead and make the most of all of your hard-earned cash. Here are some tips to help you avoid digging yourself into debt:
Add it up. It might make you a little queasy, but you’re better off knowing where you stand. Get all of your bills together and do the math.
Less cards = more control. Did you know that half of college undergrads had 4 or more credit cards?3 It’s time to get rid of that card you opened for a free T-shirt on the first day of class and keep it manageable. Have you heard of debt stacking? It’s a great way to gear down your debt. Take a look:
Check your credit. Did you know you can get your credit report for free once a year? Visit AnnualCreditReport.com (877-322-8228). You might have a “don’t ask, don’t tell” policy on your debt balance but your credit score is the number one thing banks, creditors — and future employers — look at, so you’d better know what’s up.
Develop a budget. Ugh. The B-word. Budgets are boring, right? Maybe, but for some, this can be a major wake-up call. If you seem to run short at the end of the month and can’t figure out where the money goes, this is a great way to discover less than stellar trends in your spending habits.
Learn from your mistakes. “Nearly one in five 18- to 24-year-olds is in ‘debt hardship,’”4 so even if you’re in over your head right now, you can make a couple of strategic changes and get back in the black. As soon as you learn from your mistakes, you can start taking a step in the right direction … and that’s money in that bank!
CreditCards.com, viewed on October 11, 2011, Money.MSN.com, November 8, 2011
LifeInc.Today.com, June 9, 2011
CreditCards.com, viewed on October 11, 2011
Ibid
* The examples are for illustrative purposes only. The Debt Stacking concept assumes that: (1) you make consistent payments on all of your debts, (2) when you pay off the first debt in your plan, you add the payment you were making toward that debt to your existing payment on the next debt in your plan (therefore you make the same total monthly payment each month toward your debts) (3) you continue this process until you have eliminated all of the debts in your plan. In the example above, when the retail card is paid off, the $220 is applied to credit card 2, accelerating its payment to $573. After credit card 2 is paid off, the $573 is applied to the car loan for a total payment of $1,124. The process is then continued until all debts are paid off. Note that the total payment per month remains constant.
Before you travel, follow these tips to protect yourself from identity thieves.
Let your credit card company know when you’re traveling (especially if leaving the country). Fraud departments have become more vigilant about monitoring unusual activity.
If you get a call or email about suspicious activity on your card, don’t give out personal information or call the number on the message (an oft-used trick by identity thieves). Instead, call the customer service number on the back of your card.
Suspend your mail delivery until you return. Your mail can be a treasure chest of information for identity thieves.
Remove credit cards you won’t be using and other personal information from your wallet, and copy any important documents (driver’s licenses, passport, health insurance card, etc.) so you’ll have them in case your wallet is stolen.
The end of the year is approaching fast. Do you need a financial tune-up? Here are a few areas to consider as you reflect and review:
Review your credit cards. Do you have a stellar credit score? With industry competition fierce for your business, you may be able to ask for – and receive – a lower Annual Percentage Rate (APR). While the average variable APR for credit cards is 14.46%, those with super-high credit scores can actually cut that in half (see chart below). If you’re among that elite crowd – and aren’t happy with your current rate or terms – try contacting customer service. You could negotiate your way to a better rate, or persuade them to waive the annual charge.
What’s your get-out-of-debt plan? Are you worried about your debt? If you’ve ever thought about making a dent in your debt (or changing your credit habits), now’s the time! Approximately 63% of Americans who are in debt say they worry about money one to three hours a day, and 22% worry four-plus hours a day. If you’re among them, ask your Primerica Representative how Primerica Debtwatchers™ can show you how to create a plan to gain control of your credit for good.
Check your emergency savings. Do you have three to six months’ salary stashed? If not, you’re not alone – a majority of Americans say they don’t have enough cash on hand to cover a $1,000 emergency expense.[1] To find extra cash for your emergency fund, get creative: take on extra work (ask your Primerica Representative how you can earn extra money part-time by helping families with their finances) or trim some of the “extras” from your monthly bills (think entertainment costs like dining out and cable/satellite service).
Review your life insurance coverage. If you have had a change in your life – such as the birth of a baby – this is crucial. Financial experts generally recommend about six to 10 times your annual salary. Nearly a third of all U.S. households have no life insurance, the highest percentage in more than four decades.[2] Among households with children younger than 18, 40% said they would immediately have trouble keeping up with living expenses if a wage earner passed away.[3] Don’t let a troubled economy put your family’s financial future at risk: Talk to your Primerica representative to make sure you’re (still) properly protected.
Re-shop your auto insurance. If you haven’t comparison-shopped your rates lately, give it a try! For an identical six-month policy, costs can vary as much as $500 across carriers – yet only 20% of consumers actually take the time to shop around![4] Too busy to shop? Ask your Primerica representative about Primerica Secure®, a referral program that shops multiple carriers for you!
Do you have a will? Two-thirds of Americans do not, according to a 2010 survey.[5] You can pay a lawyer anywhere from $100 to $1,000 to crate a will,[6] or ask your Primerica representative about the Primerica Legal Protection Program (PLPP), which includes free will preparation among its many benefits.
Money, July 2011
USA Today, January 7-9, 2011
Primerica, representatives of Primerica, Equifax and Primerica DebtWatchers™ will not act as an intermediary between Primerica DebtWatchers customers and their creditors and do not imply, promise or guarantee that credit files or credit scores will or may be improved, repaired, boosted, enhanced, corrected or increased by use of the Primerica DebtWatchers product. Primerica DebtWatchers™ is a trademark of Primerica, Inc. Primerica DebtWatchers is not available for purchase.
The holidays are coming up soon. Take note of these credit red flags – and put your card away at these times.
After midnight. Your judgment may be off at this time of day, so turn off the computer, put your card away and wait till morning.
When you’re near your credit limit. Credit counselors advise staying away from even a couple of hundred dollars of your credit limit to avoid any negative impact on your credit score.
When you get a notice that your rate will go up. You may be able to negotiate with your credit card company for the old rate, switch to a new company with a lower rate or avoid using credit altogether.
You’re paying one card with another, habitually. If you’re bouncing your balance around from one card to the next, you should be aware that moving it around every six months or so may show up on your credit report. Also note that transfer fees have gone up to about 4% of your debt.
If you don’t have a plan for paying it off. If you’re still charging more than you can pay off each month – and have too much revolving debt – Primerica DebtWatchers can help you create a plan to pay off your debt, and help you stick to it!
You’ve probably seen commercials advertising ways to obtain your credit report. While the commercials might be catchy, they typically don’t really have much to do with credit scores or even tell you how important they really are. Do you know what your credit score is and how it can impact you? It pays to know!
A good credit score can determine a lot of things today:
Whether you will be approved for credit
What interest rate you will get on loans
The cost of your homeowner’s and car insurance
Whether you are approved to rent a home or apartment
In some cases, whether you get a job offer or type of license
One little number can affect some pretty serious stuff right?
In this lagging economy, more people than ever are struggling to stay out of debt, stay on top of their credit and keep their scores up. Anything from a late payment on a credit card to a high debt-to-income ratio can damage a person’s credit score and it can takes years to get back a credit score that you feel proud of.
According to a recent article in USA Today, “The credit scores of millions more Americans are sinking to new lows… Recent figures show what 25.5% of consumers – nearly 43.4 million people – now have a credit score of 599 or below.” (USA Today, July 12, 2010)
In today’s economic climate of tighter lending standards, many Americans are finding it harder than ever to obtain loans and sinking credit scores aren’t helping the picture. According to a recent article, the Department of Housing and Urban Development said it intends to require borrowers to have a credit score of at least 500 to qualify for FHA-insured loans. The agency has not required a minimum score before. (CNNMoney.com, July 16, 2010)
Not only that, a late payment, foreclosure or other credit blemish could prevent you from getting a job! “According to a survey by the Society for Human Resource Management, 60% of employers are using credit checks when filling at least some of their openings.” (CNNMoney.com, July 22, 2010)
Credit scores can have a huge impact on your life. So where do you begin to get on top of your personal debt situation? The first step is to be informed. How can you even begin to get out of debt if you don’t know where to start?
Fortunately, Primerica can help. With the Primerica DebtWatchers™ product, you can get your credit score and see where you stand. Primerica DebtWatchers can help you be in the know and in control. It pays to be informed. Do you know what YOUR credit score is? One little number can play a huge impact in your financial life!
Primerica, representatives of Primerica, Equifax and Primerica DebtWatchers™ will not act as an intermediary between Primerica DebtWatchers customers and their creditors and do not imply, promise or guarantee that credit files or credit scores will or may be improved, repaired, boosted, enhanced, corrected or increased by use of the Primerica DebtWatchers product. Primerica DebtWatchers™ is a trademark of Primerica, Inc. Product not available for purchase by residents of Washington D.C.
