Managing your debt

By Duane Friend

Having enough money to pay bills and everyday living expenses is always a challenge. The following suggestions on reducing your debt is from the University of Illinois Extension website More for Your Money, at

Put more money into paying off your debt and avoid the minimum payment trap. You can be “trapped” when you pay only the minimum amount due each month.

If it seems like you’ll never get the bill paid off, you’re close to being right. The minimum payment is usually 2–5% of the balance due. Paying only this amount stretches repayment over many months or years while interest (often 18%–20% or more) continues to add up. There are times when your bill can go up, because you haven’t paid the interest cost.

Here’s another idea you might like to try to pay off your credit debt faster. PowerPay© your debts. By power paying you take the money you have available from a paid-up debt and use it to pay extra on another debt.

Each month budget a certain amount of money for all your debts. This amount is based on your minimum monthly payments, plus any extra money you can pay toward your debt.

When one debt is paid, you use the freed-up money to pay more on another debt — usually the one with the highest interest rate. As a result, your debt is paid off faster, and you save money.

Make a commitment to pay off your debt. This means that you don’t add any more debt—no more charges on your credit cards and no more loans. And, you use the freed-up money to pay down other bills.

If you bought an item on credit, can you voluntarily surrender or give back the item? Before you do this, however, you need to know how much longer it will take you to pay off the debt before it is yours. If you only have two more payments, for example, you will want to continue paying.

Use the cash to pay, or partially pay, the debt. Before you do this, check the fine print on your contract. You may not be able to do this.

Check with your credit card company to see if it will lower your interest rate. Even a few lower percentage points will save you money.

It may also be possible to transfer a credit card debt to a card with a lower interest rate. Check that the interest rate really is lower and will stay low. Some credit cards have low initial rates that increase to a very high rate after the “introductory period.”

Before you spend your money, you need to decide what is important to you. What is important to you will help you set short-term and long-term goals and spend your money wisely.

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