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| More rates and news from Controlling Debt During The Holidays
(The holidays are here and this translates into buying gifts and spending more money than any other time of year. )
For people who have trouble controlling their spending, this time of the year can prove to be especially disastrous. Having large amounts of debt is not good for a credit score or for financial health in general.
That is why controlling debt during the holidays is more important than any other time of year. You would not want to hurt your credit score because of spending more than your budget on holiday gifts and other seasonal splurges.
Understanding good debt versus bad debt and how to control your debt are some of the most important tenants of financial success.
A November 27, 2006 article by Nance Kelly of about.com, “Top eight things to know about controlling debt,” discusses ways to make sure you are in control of your financial life throughout the holiday season and into the New Year.
“When it comes to controlling debt, or getting out of debt, there is no one-size-fits-all solution. There is, however, one constant when it comes to controlling debt and getting out of debt: knowledge.”
First, let’s differentiate between good debt and bad debt. Good debt consists of things such as student loans, which are considered to be a good investment that actually increases in value over time.
Bad debt is anything such as huge balances on credit cards that are near the credit limit amount or close to it. Anything that negatively affects your credit score is considered to be bad debt.
The first thing that needs to be done to control debt is to control your spending, which can be especially difficult during this time of year.
“If you don't spend, you don't owe, pretty simple, right? Most people spend thousands of dollars a year and have no idea where that money went.”
“Start by tracking your spending for a month using a small notebook to write down every cent you spend. At the end of the month, sit down and see where your money is going, and where you can cut back. If you see that you're spending $20 a week on coffee, put that money instead into a savings account, and by the end of the year, you'll be $980 richer.”
Once you organize your spending and see where your money is going it will be a lot easier to keep track of your debt.
When paying your credit card bills, try to pay off the bills with the higher interest rates first. That way, you will not end up paying as much in interest over time.
To also save money on paying a lot in interest, always make a payment that is more than the minimum payment.
“Sometimes you'll have to pay only the minimum, but if you can afford to pay more than the monthly minimum on your credit cards, DO IT! With the change in banking regulations resulting in an increase in minimum credit card payments, your debt likely won't increase faster than you can pay it down. However, even an extra $10 a month on a $5000 balance at 18% interest can save you $4850 in interest and be paid off 262 months sooner.”
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