Debt Free

Are you going deeper into debt? Hell yes, you are, if you're the average American family. According to Federal Reserve Board's most recent Survey of Consumer Finances, the average debt load of American families earning $45,000 annually rose 33% in the last 3 years. While $ 45K/ year may not be what it once was, it represents a realistic yearly wage for many families. Realistically though, that amount of money will render you S.O.L in many metro areas like New York, Boston, Seattle, or San Francisco. Maybe you should move to Nebraska or Kansas. Interestingly enough, the study also suggests the debt wasn't accumulated by trying to keep up with the Jonses. Many things contributed to the debt such as medical bills and rising fuel costs.

Take a look at so many things that are now considered necessities that once were luxuries, or didn't exist at all. Were not talking the $4.00 latte either, but things such as Internet access, cable TV, two cars (because both parents work), microwaves, cell phone(s), and a myriad of consumer electronics such as VCRs, DVD players, TVs and computers. In addition to rising prices, there are just many more things to spend money on every month. Couple that with the skyrocketing cost of education, fuel and housing, and you can see how it doesn't take much to erode any increases in income many families have received in the past decades.

So just how are you supposed to stay out of debt? It may not be easy. First, you must create a household budget. Analyze your expenses to see how much you really do spend on every item. You may be surprised where all your money really goes. Next, see if all your expenses really make sense. Does your wife(or husband) really need to work? If you have kids, and the secondary wage earner doesn't make enough to make it worthwhile, have them stay home and take care of the kids or change careers.

Look at all the expenses associated with the second job. By the time you figure in child care, the second car, wardrobe, insurance, fuel, parking, lunch, and taxes, you may be surprised at how little you really net from a second wage earner. If the second wage earner is an attorney earning $150K/yr, then it obviously makes financial sense. If they are working in a downtown department store making $14/hr, and  drive 20 miles a day each way to work, then pay $10 to park, it may not.

Make sure you pay all your credit cards and other debt on time every month. This is supremely important, as the lenders use any excuse they can to ratchet up the cost of your credit. With a few late payments, you could find yourself with 23% credit cards. Try getting out of debt with a few of those. If your friendly, mega bank does raise your credit card interest rate, call and make sure they lower it again at some point, otherwise they'll keep at the elevated rate for as long as they can. After all, their bottom line is important.