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

• 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 #1: Set 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 planning 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 things you want 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 #2: 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 #3: 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 once 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 #4: 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.

For Additional Information and Assistance

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 nonlegal 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: info@consumer-action.org, or click here to visit the CA website.

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. Click here to visit the CFA website.

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 click here visit their website.

National Foundation for Consumer Credit (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 online. All members provide confidential services for free or a nominal amount. To locate the closest NFCC member office, call (800) 388-2227 or click here to visit the NFCC website.

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. Call (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 website.