1. Getting Out of Debt

2. Diagnosis the Problem Common Causes of Debt: –Emotional Spending: spending money to feel good, powerful, or to show group identity. Solution: find cheap ways to meet emotional needs. –Overspending: Buying “wants” instead of “needs”. Solution: making and sticking to a budget.

3. Steps for Recovery 1.Increase your Income: Increasing your income while stabilizing expenses will help you get out of debt faster. 2.Stop using credit cards: only use cash –Allows you to better track purchases –Slowly cancel credit card accounts (keeping 1 card) 3.Snowball Method: –Cut out some expenses to and use “extra” money to pay off debt (not eating out on the weekends, or buying music off iTunes.) –Pay more than the minimum amount on the credit debt with the highest interest rate, or the smallest balance. –Continue to pay minimum on other credit card debt. –Once Card 1 has been paid off, roll over the amount you paid each month from your first card to pay off this one. (Continue until all the debt has been paid.)

4. Snowball in Action Debt AmountMinimum PaymentMonths of Payments Card 3 $4,0005080 Card 2 $2,0002580 Card 1 5001050 Roll Over Method Debt AmountMonthly PaymentMonths of Payments Card 3 $4,00050 + 25 + 4039 Card 2 $2,00025 + 4038 Card 1 50010 + 3013

5. Dealing with Creditors Before you miss a payment: –Call your creditors –Explain your financial situation. –Ask them to reduce your monthly payments or the interest rate. –Tell them you plan to pay off the debt. If you stop communicating with and paying the creditors they could get ugly.

6. Next Steps Credit Counseling –Use with caution –Many places will charge you for work you can do yourself –such as talking to creditors or looking over your credit report. –Use agencies approved by the National Foundation for Credit Counseling at www.nfcc.org Begin or keep a savings account –Begin with something small By saving $5 every paycheck you’re creating a habit. Makes it easier to save in the future.