Credit Debt Counseling

5 tips for staying under your own debt ceiling

Yet debt-laden consumers routinely do just that, even as they criticize the federal government for efforts to raise the debt ceiling.

The spotlight is on the government's questionable fiscal behavior as it nears its borrowing limit of $14.3 trillion and confronts the risk of a crippling default. But most individuals are just as addicted to debt as Uncle Sam .

Total consumer debt including mortgages was $11.5 trillion at the end of the first quarter. Americans then piled more on to credit cards in April than in any month in three years.

We've been on a personal debt binge for a long time, in fact. The last year households carried less debt than their disposable income was 2001, according to the Bureau of Economic Analysis .

Like the government's situation, it's past time to attack debt more aggressively and slash spending to get it down.

"It's time to look in the mirror and think about modeling the kind of behavior we want from our country," says Eleanor Blayney, consumer advocate for the non-profit Certified Financial Planner Board of Standards . "Our government's situation reflects where we are individually."

These five essential tips for managing debt can help you avoid potential pitfalls:

1. Keep a lid on total debt.

A good benchmark for your personal debt ceiling is to limit total debt to no more than 40% of your gross income. When households have to pay more than that every month it's generally an indicator of financial distress, according to the Federal Reserve.

The National Foundation for Credit Counseling has another way of framing it. Housing, including a mortgage, should account for no more than 30% of your take-home pay, according to spokeswoman Gail Cunningham, and all debt obligations such as credit cards and car payments should total no more than 20%.

Even if you stick to that, Cunningham cautions, you've spent half your income but you haven't eaten or put gas in your car. "Stretching yourself beyond those limits isn't going to work."

2. Understand how your credit report can affect your life.

Having good credit in this tight economic and job environment is more important than ever, and with more far-reaching consequences.

What are the Differences Between Debt Reduction and Credit Counseling?

As public attention focuses on deficit-reduction negotiations, Public Notice launches its fourth ad campaign, this time wrapping Washington Metropolitan Area Transit Authority (WMATA) buses and bus shelters to drive home the organization’s message of “don’t raise debt ceiling without cutting spending.” Downtown bus routes will run the ads for one month.

Article by Cornie Herring

In today’s world, it is often easy to get in over your head and find yourself spending more than you make. It seems that everything is going up but wages, and it is all too easy to fall behind. As the result, debt incurred and accumulated over the time; initially, you are able to pay your credit card balances in full on each month and when more and more accumulated, you may go for minimum payment, then when come to the, your income may not afford to even support the minimum payments.

Like many who trap into unbearable debts, you may want to get rid of your debts by filling a bankruptcy. But bankruptcy can carry a legacy you will have to live with for years. A bankruptcy filing will stay on your record for a minimum of seven years, and you may find it difficult or impossible to obtain necessary credit in the interim.

Luckily, there are still others possible alternatives before you make up your ultimate decision on bankruptcy. You can enroll into a debt reduction program or enroll in a credit counseling program. These are the most popular debt solutions for many debtors, but you may confuse what are the differences between these two popular debt solutions, making you hard to decide your choice to enroll to credit counseling program or debt reduction program.

While there are some similarities between these two types of programs, there are some important differences to consider as well. Let us consider a few of the most important differences between debt reduction and credit counseling.

1. Close Your Credit Accounts

In credit counseling program, you will require to close all your credit accounts, exception for some exceptions like accounts for business needs, accounts with zero or very small balances. Whereas, debt reduction programs do not require all credit accounts to be closed. Sometimes, it’s good to keep a few of credit cards for emergency purposes.

2. Completion Period

Credit counseling services typically take longer to complete than debt reduction services. The average length of time to liquidate debt through a credit counseling service is 5 years whereas in debt reduction programs can be completed in less than a year.

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