Debt Help & Advice

    Financial Debt AdviceDebt has become a pervasive part of the American way of life. Household debt has crept upward over the past few decades, with people more willing to take on greater amounts of credit card debt, student loans and mortgages.

    And some people have debt simply because of bad circumstances. Unemployment, medical emergencies, business setbacks and divorce can leave even the most frugal individuals unable to pay their debts.

    Today, U.S. consumers are nearly $3 trillion in debt – not counting mortgages – and about a third of that is on credit cards.

    More debt is cutting into people’s paychecks, sometimes eating up 25 percent or more of their take-home pay. Finance experts say this is just too much debt; they suggest individuals spend no more than 10 percent of their paychecks on debt, excluding mortgages.

    Here’s the good news: People in debt have options. Debt help is available. With enough planning, hard work and persistence, individuals can find their way back to solid financial ground.

    Here’s some help to start taking control of your finances:

    How to Avoid Debt

    The best financial option is, of course, to stay out of debt entirely, rather than to dig yourself out of debt. If your bank account is in the green, make sure to keep it there.

    Here are some strategies to help you avoid excessive debt:
    • Make a budget, and stick to it.
    • Set realistic financial goals.
    • Don’t buy what you can’t afford.
    • Pay with cash whenever possible.
    • Pay your bills on time and avoid late fees.
    • Pay more than the minimum balance on your credit card accounts.
    • Monitor your accounts for changes in rates or fees
    • Build a financial safety net by saving a percentage of your income in an interest-bearing account.

    Good Debt vs. Bad Debt

    If you have debt, you’re like most Americans. While debt is ubiquitous in American society, not all debt is bad. Yes, there is such a thing as good debt. Most Americans would not be able to afford a house, a car or a college education for their children if they didn’t borrow to obtain these things.

    Good debt is defined by three factors:
    • The item being purchased is a necessary part of your life.
    • You can afford the monthly payments.
    • It will be paid off in a reasonable amount of time.

    Good debt also typically adds long-term monetary value to your life.

    Mortgages are good not only because they provide necessary shelter, but also because homes typically appreciate in value, adding to your net worth over time.

    Student loans are similar. Although you’ll be in debt for several years after school, higher education increases your potential earning power over your entire career. The idea here is that the extra money you earn will make up for the cost of college and then some.

    Bad debt is the opposite and may be marked by any of these qualities:
    • You don’t really need the item.
    • It is a stretch to afford the monthly payments.
    • The payment period is open-ended or undefined.

    The worst and most common type of bad debt is credit card debt.

    Debt can also be divided into long and short term. Long-term debt includes mortgages and student loans. Short-term debt includes credit cards, car loans, 401(k) loans, medical costs, legal bills, alimony and payments to the IRS.

    Do You Have a Debt Problem?

    Even if most of your debt is good debt, you may still have too much of it. Whether you have too much debt is based mostly on your income and your ability to pay. There are warning signs that you have too much debt or are about to lose financial stability.

    Ask yourself the following questions, and be honest:
    • Over time, is an increasing percentage of your income going toward paying your debts?
    • Do you pay your bills late because you don’t have enough money?
    • Have you stopped paying some of your debts?
    • Are you paying the minimum on your credit cards because you can’t afford more?
    • Are you using cash advanced on your card(s) to pay for essentials like groceries, utilities, etc.?
    • Do you utilize payday loans?
    • Have you maxed out your credit limit(s)?
    • Do you have little or no savings?
    • Have you borrowed money from friends or relatives?
    • Have debt collectors begun to call you, or are you receiving overdue notices from creditors?
    • Are you constantly worried about money?
    • Are you and your spouse fighting over money?

    You Can Fix Your Financial Situation

    If you answered yes to more than a couple of those questions, you can be fairly certain that you have a debt problem. If so, this much is certain: You are not alone.

    This is also true: You can’t change what has happened to your money or your financial condition.

    But you can change the future of your financial situation. You can do what others have done successfully – face this challenge. In other words, stop making excuses or denials. Professional debt help and sound debt advice is available.

    Here are five debt help strategies to deal with your debt:
    1. Credit counseling: You work with a credit counseling agency that enrolls you in a debt management plan (DMP).
    2. Debt settlement: This can trim the principal of your debt. It is also known as debt resolution and debt negotiation.
    3. Debt consolidation: This groups all of your debts into one monthly payment.
    4. Bankruptcy: You file for either a Chapter 7 bankruptcy, which cancels your debts, or a Chapter 13 bankruptcy, which sets up a years-long repayment plan.
    5. Do nothing: If you have little to no income or property and don’t expect things to change, you can do nothing, and you may be what’s known as “judgment proof.” Collectors will still hound you for payment and may even sue you, but since you have no ability to pay, any judgments against you will be fruitless.

    No matter how your finances currently look, you can improve your situation. Figure out what option is best for you, and then make a commitment to repair your finances and get back on track.

    Bill Fay

    Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at

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