ROSELAND– Everyone runs up a little credit card debt, right? That’s what many people tell themselves to justify carrying heavy loan amounts, but the fact is that undisciplined spending and poor credit management are serious problems that must be addressed.
The New Jersey Society of CPAs (NJSCPA) offers five signs that show your debt and spending are out of control and provides advice on what to do:
You Pay for Everything with Credit Cards
Once upon a time, you used cash when buying groceries, paying for gas or picking up a quick lunch, but now you whip out the credit card for virtually all of your regular daily purchases. If this sounds familiar, you are probably either in financial trouble or on the verge of it. CPAs advise that while plastic is easy to use, the credit card balances you are building will come back to haunt you. If you are already carrying a balance on your card, your new purchases will likely increase the amount of interest you’ll be charged monthly. And if you’re relying on credit because you don’t have the cash, it’s time to take a realistic look at your budget and consider necessary changes.
You’re Adding New Accounts
What happens if you can’t pay your credit card or other bills? Some people solve this problem by opening new accounts and using balance transfers or cash advances to make required payments on their existing debt. They might also add a new account if their old cards have reached their credit limits. This financial jockeying solves the immediate problem, but it also digs you deeper into debt.
Your Debt’s Just Getting Bigger
Even if you don’t keep spending, your outstanding credit card balances may keep growing if you make only the minimum payment every month. That’s because the interest rate you owe on your outstanding debt is included in your balance. You then have to pay interest not only on your past purchases, but also on that added interest.
You’re Missing Payments
It’s always a good idea to contact your creditors when you can’t make a payment and ask about temporary reduced payment plans, payment moratoriums or other options. This step could help you prevent a bad credit rating or cancelled account.
You Avoid Your Bills
You have a stack of unpaid bills that just keeps growing. You screen calls so you don’t have to talk to angry bill collectors. If you’re in this situation, you won’t be able to sidestep the problem forever. CPAs recommend that you get a realistic sense of where you stand financially and begin contacting creditors, cutting spending or taking other necessary steps to get your financial life back on track.
Financial Literacy Resources
Want more debt management information? The CPA profession’s 360 Degrees of financial Literacy campaign (http://www.360financialliteracy.org/Tools/Calculators/Accelerated-Debt-Payoff) offers a wide range of resources relating to common financial planning issues, including debt problems. Tools on the site include a calculator that determines the benefits of accelerating your debt payoff and a glossary of credit management terms.
Your Local CPA Can Help
Of course, you can’t beat the value of the personal advice you receive when you consult your local CPA. Remember to turn to him or her with all your financial questions. If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to www.findacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.
For more information on various personal financial matters, visit the NJSCPA’s public service website at www.MoneyMattersNJ.com. While visiting, you can subscribe to Your Money Matters, the NJSCPA’s free, monthly email newsletter to receive valuable personal financial planning advice throughout the year.
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