You Can Do It
Managing Debt, Building Wealth
A fact sheet explaining how to get out of debt, plan for your financial future, and save money. Includes a step-by-step guide to money management. Credit can be a useful tool for managing your finances and even building wealth. But, mismanaging credit can derail your long-term plans and lead to financial difficulties.
Warning Signs of Too Much Debt
Ask yourself the following questions:
- Do you have to borrow to pay current bills?
- Are you frequently late paying your bills?
- Can’t avoid using credit?
- Are you being contacted by bill collectors?
If you answered yes to any of these questions, you are probably not managing your money well. You are not alone. Help is available.
The information in this brochure can help you take the first steps to regain control of your finances and help you reach your goals - like buying a house, paying for college, or simply achieving peace of mind.
STEP ONE - Get Specific Financial Goals
Setting financial goals is a way of helping you plan for the future - whether it’s next month, in five years or when you retire. By planing for things you want to accomplish, you have a better chance of having enough money when the time comes.
Short-term goals are for things you would like to do soon, or at least over the next couple of years. For many people, these include paying off a credit card balance, finishing their education, getting a new job, planning a wedding, buying a car, or taking a vacation.
Long-term goals are for things you would like to accomplish in five to ten years or longer. Long-term goals may include buying a home, getting a better paying job or a promotion, starting a family, saving money for your children’s education, and planning for your retirement.
Develop a budget to help keep you on track towards reaching your goal. Creating a budget will help you manage your finances by tracking how you spend your money.
STEP TWO - Pay Off Your Debts Quickly
Set a goal to pay off your debts as quickly as you can.
If you have more debt than you are comfortable with, take whatever steps are necessary to change your spending habits for the next year or so to get your finances under control and reduce your debt level.
Don’t be discouraged if it takes a while to adopt new money management habits. Depending on how much you owe, a realistic time frame will help you stick to your resolution and get out of debt.
STEP THREE - Decide To Save
When you are debt free, start putting the money you were using to pay off your debts into a savings or investment account to meet your long-term financial needs and build wealth. One of the most effective ways to begin a savings program is with automatic deposits into a savings account. Determine how much you can budget for savings then arrange to transfer the funds automatically to a savings account on a regular schedule, such as one or twice a month.
Take advantage of the power of compound interest that allows even moderate-income families to build six-figure wealth. For example, if you save $25 every week for 40 years, even with just a 5% return, you’ll have more than $165,000.
Include some money in your budget for an emergency savings fund in case you get sick or laid off from your job. Having such a fund can help you get through temporary financial setbacks.
STEP FOUR - Get Expert Help
You can take control of consumer debt. And you don’t have to do it alone. If your debt is out of control, start by contacting your credit issuers to see if they will provide repayment assistance. Seek help from reputable credit counseling sources or adult education programs such as those listed at the end of this brochure.
But beware of bad deals that will make the situation worse. Many companies offer “quick money” to people in desperate situations. Some of the loans offered by walk-in-store-front lenders have high interest rates and late fees that can drastically increase the amount you owe if you miss even one payment. Do not enter into any loan without reading all the fine print and asking what will happen if you can’t pay the loan back as agreed. The answers should convince you to stay away from high-interest loans.
Consumer rights
There are federal laws that protect consumers when they apply for credit, have debt or take out loans.
Contact the Federal Trade Commission for additional information on these laws or to file a consumer complaint.
Federal Trade Commission (FTC) Bureau of Consumer Protection
The FTC is a federal agency that protects consumers against unfair, deceptive, or fraudulent practices and enforces a variety of consumer protection laws and trade regulation rules. You can access the FTC’s library of consumer publications at www.ftc.gov. You can also contact the FTC at Consumer Response Center, Federal Trade Commission, Washington, DC 20580; (202) 382-4357; TDD: (202) 326-2502.
For more information
Consumer Action (CA) is a non-profit advocacy and educational organization founded in 1971. CA publishes surveys and distributes multilingual educational materials, both in printed form and on its Web site, and provides non legal advice and referrals on consumer problems. Contact CA at 717 Market Street, Suite 310, San Francisco, CA 94103; (415) 777-9635 or 523 West Sixth Street, Suite 1105, Los Angeles, CA 90014; (213) 624-8327. Leave a TTY message anytime at (415) 777-9456; e-mail: [email protected]; or you can visit the CA Web site: www.consumer-action.org.
Consumer Federation of America (CFA) is a non-profit association of over 250 pro-consumer groups, with a combined membership of 50 million. Founded in 1968, it advances the consumer interest through advocacy and education. Visit the CFA Web site: www.consumerfed.org.
The NeighborWorks® Network has transformed the lives of hundreds of thousands of families in more than 900 communities by developing resources for home ownership, home improvements, cleaner environments, affordable rental housing and other quality housing services. For more information about the NeighborWorks® Network and the location of NeighborWorks® organizations across the country, contact: Neighborhood Reinvestment Corporation, 1325 G Street, NW, Suite 800, Washington, DC 20005; call (202) 220-2300 or (800) 325-NWKS; or visit the Web site: www.nw.org.
National Foundation for Credit Counseling (NFCC), founded in 1951, is the umbrella group for the only national network of non-profit counseling organizations providing education and counseling services on budgeting and credit face-to-face, by telephone, by mail and on-line. All members provide confidential services for free or a nominal amount To locate the closest NFCC member office, call (800) 388-2227 or visit the www.nfcc.org.
Cooperative State Research, Education and Extension Service (CSREES). Contact your local county extension office (offices are listed under Local Government in the telephone directory), a land-grant university or the Cooperative State Research, Education and Extension Service, U.S. Department of Agriculture, Washington, DC 20250-0900; (202) 720-3029.
American Express Company. Copies of consumer education materials are available from the American Express Consumer Affairs Office, 801 Pennsylvania Avenue, NW, Suite 650, Washington, DC 20004; or at the American Express Web site: www.americanexpress.com.
Published by American Express Company in cooperation with Consumer Action, the Consumer Federation of America, the U.S. Cooperative State Research, Education, and Extension Service, the National Foundation for Consumer Credit, and the Neighborhood Reinvestment Corporation. American Express Company, Consumer Affairs Office, 801 Pennsylvania Avenue, Suite 650, NW, Washington, DC 20004.
This publication may be reproduced, with permission, for non-profit educational purposes.
Published / Reviewed Date
Published: April 02, 2000
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