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Tracking Daily Expenses Helps to Stay Out of Debt

KELVIN WARD is on a spending diet.

Over several years, Mr. Ward, who works for a national nonprofit group here, charged $32,000 on a walletful of credit cards. ``I fell into a plastic trap,'' he contends. ``In the post-Christmas haze, I realized that if I put all my January salary toward paying off that month's debt bills, I would still owe $2,000.''

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Four years later, he has whittled the debt down to $9,000 and expects to pay it off in 18 months.

Getting or staying out of debt demands clear thinking, attention to detail, and discipline, credit counselors say. And the rewards of a strict fiscal regimen, say those who have come out of debt, are relief, more self-respect, and confidence in their ability to manage their financial future.

The Consumer Credit Counseling Service of Greater Washington advised more than 12,000 Washingtonians last year. Clients included everyone from those receiving public assistance to people making more than half a million dollars, says president Joanne Kerstetter.

The one constant, she says, is that ``people spend as much as they make.''

Little safety margin

With so many people leaving little safety margin in their finances, some slip over the edge when hit by unexpected expenses. A survey commissioned by the Washington-based National Foundation for Consumer Credit found that 18 million United States households need help managing their debts.

The biggest problem is that most people ``haven't realized that, just like learning to drive, you have to be taught to manage money,'' says Durant Abernethy, president of the NFCC.

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Five key signs of financial trouble are:

* Purchasing many items on extended payment plans (Installment payments, Mr. Abernethy says, ``should not exceed 20 percent of take-home pay.'');

* Having only a vague notion of how much you owe;

* Being able to afford only the minimum payment on your credit cards and other bills;

* Maximizing your credit limit on your credit cards;

* Borrowing from one source to pay another debt.

But the most dangerous problem, Ms. Kerstetter says, is avoiding paying off debt. ``A lot of times ... [people] try to avoid the situation and think it's going to get better.''

The antidote, she says, is planning. Charting all income and expenses for one month, Kerstetter adds, can help clear up an imperiled financial situation.

When Joy Landry lost her job, she was making $36,000 a year. After some unemployment, she took a job paying $14,000. Soon she had amassed $16,000 in debt.

Record every expense

A visit to the Consumer Credit Counseling Service (CCCS) had her charting every detail of her financial life - from take-home pay to trash-removal fees. She tracked expenses for eating, weekends, and clothing, which, counselors warn, are most likely to slip by unnoticed. Holiday and seasonal expenses, car insurance, and auto repairs can also blindside consumers.

Of the 645,700 families that visited CCCS nationwide last year for free or low-cost counseling, 29 percent were able to help themselves after initial budgeting assistance; others, like Ms. Landry, were enrolled in a debt-repayment program.

Based on Landry's monthly salary and expenses, CCCS brokered a deal with Landry and her creditors: She would send CCCS $467 a month, which it would forward to the companies. Several creditors even suspended interest charges and late fees.

Counselors provide great relief for creditors, too. Steve Mowrer, vice president for credit for Texas-based Pier 1 Imports, says CCCS alone recovered about $1 million for his company last year. CCCS reports having returned $1.14 billion to creditors in 1993 - money that would likely have been lost to bankruptcy.

For individuals, the rewards of shedding debt are manifold, too. ``Now I can say to future creditors, `Yes, the debt was massive, and yes, this looks bad; but I paid everything off,'' Ward says.

Abernethy says more than getting people out of debt, counselors are ``helping people understand that self-worth is more tied to your ability to manage money carefully'' than to buying things.

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