Leave Debt in the Dust: Map your own path out of the financial minefield

	• Intro Credit Cards • Parental Care • Tuition • What a Pay Raise Means • Your Best Investment • Debt Toolkit Take the Quiz • Exiting the Spend Cycle Related Articles • Avoiding Financial Trouble: Ten Tips • Make a Budget • Your Repayment Options Tools & Calculators: • How Much Am I Spending? • How to Reduce My Spending • How to Pay Off My Balance Discussions: • Getting Out of Debt

Credit Cards
If you're suffering from sky-high credit card balances or consumer loans, you're not alone. The ratio of consumer debt to personal income rose from 14.10 percent in 1992 to 18.11 percent in 1996. What to do:

• Start with a balance sheet. Determine your monthly expenses and income, and put them in two separate columns. Sounds simple. But how many of us do it? One approach is to carry a notebook everywhere you go. Jot down all your expenses over a month. Or you can buy everything with a check, so you have a built-in record of your spending. Quicken or another financial software package can help you track your habits. Once you know your purchase patterns, it's time to pinpoint how much money--if any--you have left over.

• Start small. One school of thought says to make a list of whom you owe and for how much, plus the minimum monthly payment and interest rate. Then focus on the smallest debt first. "It's often just easier to gather momentum if you pay off the littlest one first," says Eleanor Dean, senior financial adviser with American Express in Chanhassen, Minnesota. When you've paid off that one, use the extra money to chip away at the next biggest amount you owe. Another philosophy espouses first tackling the debt with the highest interest rate.

• Consolidate. Shop around for the lowest credit card interest rate you can find and consolidate all your debts onto one card. But be careful. "You need discipline," warns Dean. "Otherwise, you'll start charging again, and you'll wind up in deeper debt." Also read the fine print. An introductory offer may promise 2.9 percent for the first six months, then balloon to 18 percent shortly thereafter--and charge an exorbitant rate for balance transfers. If you haven't paid off the debt by the time the rate increases, you may find yourself in even worse shape. Or, consolidate all your debts into a home equity loan, which will probably give you a tax deduction. Also consider a consolidation loan but beware of high interest rates, unless you can put up collateral. Next: Parental Care>

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