NFCC Financial Education Blog ? Resolve to Reduce Debt

By Gary Silverman

The new year is a time for parades, football, recovering from holiday festivities, and resolutions. I?m here to help with the resolutions. And this year we?re going to look at your credit cards.

First, are you the one using them, or are you letting a total stranger charge on your behalf? That may sound ludicrous, but most people I know do not look at their credit report, let alone look at it on an ongoing basis. If they did, they might find nothing?or they might find that there are credit cards opened in their name that they know nothing about.

One of the most important tools in guarding against identity theft is to periodically check your credit report. There are three major credit reporting agencies, and each one of them will give you a free report once a year. I do all three spaced out across the year so that I?m pulling a free report every four months.

Resolution number one: Go to?www.annualcreditreport.com?and check out your credit report.

Next, are you paying off your credit card each month, or are you carrying a balance? If the latter describes you, there is now a box on your statement that tells you how long it will take to pay off the card if you only make the minimum required payment each month. The answer is usually in years. That means you could be paying interest for years after whatever you bought has been eaten or taken to a landfill.

Resolution number two: Pay off your credit card each month, if possible. If not, at least pay more than the minimum.

Last year, how long did it take you to pay off all your Christmas shopping? A month? Three months? Six months? Still paying?

Well, then, prepare for next year. Look at how much you spend on gifts this season. Now, divide that by 10 and save one-tenth of that amount each month. You get the interest instead of the credit cards. It?s also quite freeing. You see, when you have the money already saved up there is no question as to if you can afford a particular gift. If you have the money saved for that purpose, then you can afford it.

Why 10? I do know there are 12 months in the year, but I want you done by Halloween so you can take part in some of the earlier sales.

Resolution number three: Save for next year?s purchases so you won?t have to depend on your credit cards.

Gary Silverman holds the Certified Financial Planner (CFP?) license and is a member of the Financial Planning Association (FPA?). Gary is the founder of Personal Money Planning, a retirement planning and investment advisory firm. Find out more about Personal Money Planning at the company website or follow on Facebook.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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Source: http://financialeducation.nfcc.org/2012/12/13/resolve-to-reduce-debt/?utm_source=rss&utm_medium=rss&utm_campaign=resolve-to-reduce-debt

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