Practical Money Skills for Life

Avoiding Credit Trouble

How to Prevent and Solve Financial Difficulties

Practical money skills are an important part of managing life. By handling your personal finances wisely, you can enjoy peace of mind, financial security, buying power, and freedom that will enhance the rest of your life-Practical Money Skills for Life.

You're the One in Charge of Your Credit and Finances

You can avoid most credit and money problems by planning a realistic budget and sticking to it. However, it is not uncommon for people to experience financial difficulties now and then. This pamphlet explains how to prevent financial difficulty, the warning signs of financial problems, and how to solve financial problems when they do arise.

Taking Charge of your Finances

How to Prevent Financial Problems
You can stop many financial problems before they begin by managing your money wisely. Here are some tips to keep your money in control:

BUDGET WORKSHEET

MONTHLY INCOME

Income #1 ________________

Income #2 ________________

Interest ________________

Pension ________________

Other ________________

TOTAL ________________

MONTHLY EXPENSES

Fixed

Rent/Mortgage ________________

Car Loan ________________

Car Insurance ________________

Variable

Credit Card ________________

Groceries ________________

Utilities ________________

Phone ________________

Transportation ________________

Child Care ________________

Entertainment ________________

Clothing ________________

Medical ________________

Education ________________

Misc. ________________

TOTAL ________________

Subtract expenses from income

RESULT ________________

Create a budget. Take the time to make a budget that fits your income and needs. To do this, review your income and expenses for the last few months. Your credit card statement, checkbook register, and cash receipts will give you a good idea of what you spend and where it goes. Then subtract your average monthly expenses from your average monthly after-tax income. If you don't have at least 5% of your income left for savings, you need to set tighter spending limits or increase your income. Focus first on the expenses-such as entertainment-that you can mostly control from month to month.
For example, if you usually go out for lunch on workdays, you could save $400 a year just by bringing a lunch from home twice a week. And, instead of going out for a cup of coffee, make it yourself and save another $400 a year-or more.
Know what you owe. You should never be surprised when your credit card statement arrives. Stay aware of your credit card spending between statements. For best results, save your receipts in one place and keep an ongoing written total of what you have spent so far.
Beware of impulse buying. The convenience of buying now and paying later may tempt you to make impulse purchases that you can't afford. Regardless of the sales price today, you need time to think about any large purchase. Remember that large purchases paid in installments can lead to finance charges far greater than that special discount.
Use cash advances wisely. Avoid using cash advances for regular daily expenses. Charging a group meal to your card and pocketing the cash is a variation on this theme. If you can't cover your normal expenses this month, you probably won't be able to cover them next month either.

The Warning Signs of Credit Trouble

The easiest way to solve credit problems is to tackle them early before they get out of control. Any of these warning signs may mean that you are deeper in debt than you should be:

Consistently working overtime or an extra job to keep up with your expenses
Using your savings account to pay for regular living expenses
Needing to borrow money to pay off another debt-for example, using a cash advance from one credit card to pay off another
Letting your credit card reach its spending limit
Being unable to pay your monthly bills on time
Receiving calls or letters from credit agencies asking for payment
Being denied credit or having your credit revoked

If you spot any of these warning signs, you need to change your financial habits and avoid the risk of jeopardizing your good credit history.

What to Do if You Find Yourself in Trouble

If money difficulties arise, don't panic. Instead, develop a plan to regain control of your finances. If you need help, ask for it (see back page for useful resources). Here are other tips to help you solve financial problems:

Drastically reduce your credit card usage. If necessary, leave your card at home or keep it in a different part of your wallet as a reminder.
Establish a realistic budget with account payments as a top priority.
Set up a specific timetable for paying off your debts.
Make at least the minimum payment due every month.
If you can't make certain payments on time, call your creditors right away. They will help you work out a reasonable payment schedule.

Beware of "Quick Fixes" for Credit Problems

Some companies claim they can "fix" bad credit histories for a large sum. You should know, however, it is legally impossible to alter an accurate credit history. If you find yourself in credit trouble, work instead with a budget and your creditors to reestablish a good credit rating.

For Credit Assistance

Contact any of these valuable consumer resources today.

National Foundation for Consumer Credit (NFCC)
Provides information on financial and consumer topics, and also can refer you to a Consumer Credit Counseling Service (CCCS) in your area. For general information, call 1-301-589-5600. For a referral to a local CCCS, call 1-800-388-2227.
www.nfcc.org

Consumer Credit Counseling Service (CCCS)
Offers credit assistance from your choice of more than 700 offices. For credit counseling: contact the NFCC for a CCCS referral or check the community services section of your phone book for a local CCCS listing. For a referral to a local CCCS, call 1-800-388-2227.
www.nfcc.org

Federal Trade Commission (FTC)
Publishes general information on consumer credit. For educational materials, call 1-202-326-2222.
www.ftc.gov

National Consumers League (NCL)
Answers specific questions about credit. For answers to your questions, call 1-202-835-3323.
www.nclnet.org