Are you looking for a way to get out of debt?
Wed, 31 Aug 2011 01:50:00 GMT —
Most households in the United States have an average of almost $16,000 in credit card debt, and consumer economists say most don't know how to turn that around.
So KRCG's Facebook Crew sat down with the experts Tuesday to find out how to become debt free.
From buying a house, to buying education, there are lots of ways to go into debt.
But consumer economists told me the easiest way to get into debt is by using a plastic card that was created in the early 1950's.
"We've kind of become a nation of debtors. You know with the invention of the credit card, we've changed how we look at debt. We've really become much more dependent on credit cards, especially for buying things now instead of waiting until we can afford it, MU Consumer Extension Economist Brenda Procter said.
So what is the best way to pay off all of your debt?
Procter told me first, you need to create a budget and stick to it.
Second, you need to attack the highest interest rate debt by doing what she calls power paying or the snowball method.
"Pay the minimum on the lower interest rate cards for awhile. While you're doing that pay as much as you possibly can on you're highest interest rate debt, Procter said.
Procter said after it's paid off take the money you were paying on that high interest rate and apply it to the next highest. Keep doing that until every single debt is paid off.
The director of the University of Missouri Financial Success agreed with Procter. But he suggests the best way to stay away from debt is to hide that credit card.
"Don't use a credit card to finance an unaffordable lifestyle. For example, if you're bringing in $1500 a month and you're spending $1700 and you're making up the deficit with a credit card, that's not going to help you long term. Because you're just adding more debt, MU Financial Success Director Ryan Law said.
Law said it's also important to have an emergency fund stashed away somewhere so you don't pick up that credit card for help when something unexpected happens.
So tell us what you think. What budget plans do you follow to pay off your debt?
Many in the United States are in a debt disaster and don't know how to turn it around.
So are you looking for a way to get out of debt?
Tune in tonight at ten as KRCG's Facebook Crew talks with experts to get some tips on how to be debt free.