How To Dig Out of Debt in Tight Times
Five steps to get you back on track
By JIM HANDLY
Updated 7:25 PM EST, Fri, Nov 7, 2008
Even people who thought they were doing everything right are finding financial trouble these days, according to Kim Lankford, longtime financial advice columnist at Kiplinger’s Personal Finance magazine.
Lankford said a lot of people think they are living within their means until something strikes out of nowhere: they lose their job or their home equity line of credit dries up.
So what should people do to secure their financial footing?
First, if you are already in debt, Kiplinger’s says start by getting help early from a financial adviser or credit counselor. Many people are in denial. Before it gets bad or you get behind, call a financial adviser and get a plan. They can help you turn things around, Lankford said.
Second, tackle credit card debt by paying off the highest interest rates first. Some who have trouble getting started may want to clear their smallest balances first, Lankford said. You can also try to negotiate a lower rate with your lender.
Some Washington residents said high interest rates have forced them to clear their balances every month, and some are using only cash now.
Don’t miss any payments. This third step is a sure fire way to lower your credit score.
Kiplinger's also suggests keeping track of your spending every day. Put together a monthly budget and watch where your money is going.
Lastly, consider working extra hours to boost your income -- perhaps a part-time job. Many retailers are hiring now for the holiday season.
Now more than ever it is important to have a cushion, even if your job seems secure and your credit is good, Lankford said. Financial experts recommend three to six months of salary for an emergency fund.
First Published: Nov 6, 2008 1:17 PM EST
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