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Credit And Debt Management
By: Kelly Kennedy

Today's consumers benefit drastically from the usefulness of credit. Credit cards are especially useful for large purchases, emergency situations, reservations, identification, and protection from fraud. Unfortunately, millions of consumers abuse credit cards beyond their financial earnings. The use of credit results in costly interest payments and late fees, impulse buying, overextended lifestyles, and the unnecessary stress from harassing telephone calls from collectors.

Do You Think You Might Have a Problem with Debt?

Below is a list that will help determine whether you are a single mother debt problems.

Over the Limit Credit Card Spending

If all of your credit card balances are greater than 80 percent of your credit limits, you should consider this a danger signal to debt.

Too Many Cards/Too Much Debt

If you can't pay off your combined credit card debt within one year, you should consider this a serious issue.

Out of Money

Many people use credit for small purchases such as food and gas. If you previously paid cash for these or other small items, but are now using credit, not debit or cash, it could be a sign that there is a problem.

High Debt-to-Income Ratio

Your debt-to-income ratio measures the amount of debt you have against the amount of income you are making. You can calculate this ratio by dividing your total monthly debt payment (excluding mortgage/rent) by your total monthly gross income (before taxes). If your debt-to-income ratio is close to or over 20 percent, this is a sign that you may have a debt problem.

Emergencies

Crises and emergency situations do occur, and sometimes people are unable to afford such things such as emergency auto repairs or medical expenses because their credit cards are tapped or the majority of their earnings are put towards debt repayments. It's always important to keep an open line of credit available for such situations.

Minimum Payments

What many people don't realize about revolving credit card bills is that making only the minimum payment can take 12 to 15 years to repay. You are not applying any significant amount toward the principal if you are only making minimum payments concluding that you may be overextended and in need of putting together a spending plan.

Using Your Credit to Make Payments on Other Cards

Taking cash advances to pay bills is not a solution for paying off debts. If you are paying one credit card with another you are actually creating more debt. You will also be faced with any cash advance fees and interest from that new line of credit.

Balance Transfers

Many creditors offer new credit cards with balance transfers available at low interest rates for only a limited introductory period. It's important to remember, though, that after the introductory period the interest rate usually skyrockets up to 19 percent or more. As well, a growing number of credit cards are associating fees with transferring balances.

Skipping Payments

If you are late with getting payments in such as your mortgage, rent, car loan, or utility bills more than once per year and are juggling bills and skipping payments, this is a definite sign that you have a debt problem.

Borrowing Money

If you are borrowing money from family and friends and unable to pay them back while struggling to pay your bills, credit counseling can teach you how to budget or advise you to go on a plan for paying off your debts.

Debt Consolidation Loans

Are you borrowing from a new source to pay off an old debt? Many people who do so obtain debt consolidation loans to pay off all their existing bills. However, once the bills are paid off, some people wind up charging on their credit cards again. This means having to pay back the loan plus the new credit card charges, which ends up driving people into further debt. Learn more about debt consolidation at Incharge.

Unsure of the Amount Owed

If you have no idea how much debt you owe on a monthly basis and keep using credit cards, your financial spending might be slipping out of your control. If you noticed that you were nodding your head up and down as you read through the list of debt problems you could be on your way to a serious problem with your finances. What to do about it as a single mother comes next.
Help for Single Mother if in Debt

If you're ready to tackle your own debt pile, here's what you need to do:

Get to know your debt

Study everything relevant about your debt such as your account balances, the interest rates, if the interest is deductible, how and when those rates can change and find out if you'll face any kind of penalties for paying an account early. If youÕre not sure call your lender and ask.

Prioritize your debt

Divide your debts into two piles; deductible and non-deductible debt. Non-deductible debt is debt where you don't receive a tax break on the interest such as is credit cards, car loans and personal loans. Deductible debt includes mortgages, home-equity loans and possibly student loans depending on your income. Once you divided your debt into piles rank them from highest interest rate to lowest.

Eliminate your debt

You can start with your highest interest rate, non-deductible debt-or the non-deductible debt with the smallest balance. Either way, put as much money as you can toward your first debt-elimination target. Once you pay that account off, take the same amount of money and put it towards your next target. Keep doing this until you have no non-deductible debt left. Next you can start tackling your deductible debt, boost your investing, or both.

How to Avoid Getting in Debt

* Pay off balances by the due date to avoid interest charges and late fees

* Charging only what you can afford to pay off in one month's time

* People who are close but unable to pay balances in full each bill cycle will still be able to put a hefty sum towards paying off the credit card which will refrain them from continued charging

* If you know you can't afford it, don't buy it

Below are some proven effective ways of cutting down expenses and saving money:

* Cut down on long-distance telephone calls or make calls when rates are cheapest

* Cut down on restaurant and take-out meals. Preparing your own food

* Bring your lunch to work and pack your children's lunch. You'll save a lot. Put yourself on a lunch budget where you treat yourself one or two times per month

* Try to reduce your home-utility bills by turning off lights when you're out of the room, being conservative with the thermostat, checking weather stripping to eliminate drafts, or air drying dishes and laundry

* Use your own bank's ATM to avoid fees from other banks

* Seek out garage sales and your newspaper's classified sections for discount purchases such as toys, clothes, new and used items at a good price

* Go to matinee movies instead of the regular showings where prices are higher.

* Clip newspaper, magazine, and other print coupons

* Save on expensive dry-cleaning costs by purchasing a book on fabric care

* Use your local public library. In addition to free reading materials, many libraries offer free or reduced-price videos, audiotapes, CD-ROMs, and children's games for rental

* Practice single mother do-it-yourself repairs and maintenance around the house

* Comparison shop for clothing and household items

* Create your own greeting cards

* Avoid expensive gift-wrap. Shop dollar stores for gift bags

* Take proper care of your teeth to prevent costly dental bills

* Exercise for a healthier body and state of mind

* If you drive an automobile, learn how to change the oil rather than paying someone else to do it

* Join a co-op or food-buying club to save hundreds of dollars per year over regular supermarket prices. Call the National Cooperative Business Association at 1-800-636-6222 for a list of regional warehouses

* Buy store-brand products instead of national name brands

* Shop around for the best gas prices, and plan your errands and driving destinations to eliminate unnecessary miles

* Pump your own gasoline and use the lowest-octane suggested in your vehicle's owner manual

* If you're considering getting a dog or cat, check out local animal shelters. The small purchase cost often includes vaccination and neutering

About the author:
Kelly Kennedy writes for http://www.singlemotherresources.com,a great online source for single mothers and financial advice

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