A friend recently asked me what she could do to take control of her finances. She didn’t bring up numbers, and I wasn’t comfortable asking, but I know that she has a good amount of student loan debt as well as credit card debt. It was clear she wasn’t entirely sure how much debt she had, nor had she thought about a long term repayment plan.
After thinking a moment, I responded that the first step for her should be to sit down and get the facts. In my opinion, to get a handle on her finances, she needs to figure out what she owes, who she owes it to, and what and when she has to pay.
Simple enough, right? Surprisingly, a number of people in debt have no idea how much debt they truly have. That seems to be especially true with credit card debt. Too many consumers believe that if they pay the minimum amount due on their credit card, that they will be making a dent in the debt. Unfortunately, due to high interest rates, these consumers often aren’t even paying the interest they were charged that month. That means their debt is increasing, rather than decreasing.
I realize that for many people reading, this might seem like common sense, but for some of you, this might be surprising news. Either way, if you were like my friend and asked me what you should do to get a handle on your debt, I would tell you the same thing – take a realistic look at what you owe.
More steps in the upcoming days. Stay tuned!
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.