How to Manage Debt Program Recap

Debt is a problem many people struggle with and if left unresolved, can easily spiral out-of-control.  While some debt is a part of life nowadays, effectively managing your debt can provide great benefits should you need to finance a car or are looking to purchase a house.  The Credit Union of New Jersey has some tips for managing your debt and help you achieve financial independence.

What is debt?  Debt is money that you have borrowed with the agreement to pay it back in full, oftentimes with interest.  Some common types of debt are mortgages, car loans, personal loans, or credit cards.  Debt is often organized into different categories:

  • Secured debt – debt associated with some sort of collateral that can be taken back for failure to repay the debt (car loan, mortgage)
  • Unsecured debt – debt without any collateral (credit cards or personal loans)
  • Installment credit – debt where repayment terms and amounts are fixed (mortgage, student loans)
  • Revolving credit – debt where repayment amounts may vary depending on amount of debt (credit cards, cash advances)
  • Fixed interest rates – interest rate does not change over the life of the debt (car loan, mortgage)
  • Variable interest rates – interest rate can change depending on size of the debt or a failure to pay debt on time (credit cards, payday loans)

While debt is scary, not all debt is bad.  Debt has a large impact on your Credit Score, which many places use to determine finance options for important purchases such as apartments, homes, cars, and furniture.  Good debt or debt that directly affects your overall net worth or helps generate you value, such as a mortgage, are positive things to have and will help boost your Credit Score and use an invoice generator to manage your financial rates.  A higher Credit Score can help you secure low or no interest payments for loans and may allow you to qualify for higher loan amounts.  Bad debt does not help you generate value and oftentimes is associated with credit card purchases for expendable items with no longer term value, such as gas, food, or utilities.  For example, if you pay a $100 electric bill on a credit card rather than a debit card, you may be paying $120, $150, or even $200 for that same bill once interest accrues.

You can find out more about all of the debts you have through your credit report.  A credit report is a record of all your credit-related activities from three major credit bureaus – Equifax, Transunion, and Experian.  It lists any credit-card accounts or loans you have, their balances, and how regularly you make your payments.  It also shows if any actions from creditors has been taken against you.  Similar to your credit report is your Credit Score.  Your Credit Score is made up of the following information:

  • 35% Payment History
  • 30% Amount Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Credit Mix

So what are the warning signs for having too much debt?

  • Spending more than you earn
  • Making the minimum payments on credit cards or having maxed out credit cards
  • Unsure about what you owe
  • Arguing with your family or loved one about money
  • Debt to income ratio is more than 36%
  • You have no emergency funds (3-6 months income)
  • Little or no retirement savings
  • Credit card balance exceeds 10% of income

If you have too much debt, what can you do to change your financial situation?  First and foremost, you have to make a plan.  Sit down and write out a budget, including your monthly income and expenditures.  This will help you visualize where you are spending money on unnecessary things, such as a $5 coffee every morning or eating out multiple times in a week.  Once you can identify areas where you can save money, put that money away, such as in a savings account, so that it can grow, or apply it to one of your debts to pay it off quicker.

You should also call any loan companies and request lower interest rates.  As long as you are able to pay something, credit card companies are required to work with you.  You may even be able to settle your debt for less, but that often comes at a price; you must report the remaining debt as income on your taxes.  You should also seek professional assistance from a financial counselor who can help you in all aspects of your financial life.  They can help fight with loan companies and help build you a responsible budget to get you out of debt.

Another way to help get out of debt is to increase your income.  Whether it is selling items from a personal hobby or unused items around the house, downsizing a car or home, or getting a part time job, being able to increase your income, if not to pay down the debt, but at least to provide more financial security is important.  Additionally, set SMART financial goals for yourself – Specific, Measurable, Adjustable, Realistic, Time-Oriented.  Lastly, never give up; oftentimes people give up too early on their efforts to become debt free.  It will not be easy or fast, so remain committed to your financial plan and reward will be more freedom with your money.

If you have any questions about your personal financial situation, you can reach out to the Credit Union of New Jersey for a free financial assessment.  For a copy of the presentation, please visit  For a copy of financial worksheets, please visit

About Andrew Dauphinee

Education and learning are passions of mine. Lifelong learning is a core part of who I am and I strive to pass that desire for information on to everyone I meet. As the Instruction and Outreach Librarian, it is my goal to provide quality, informative, and relevant programming to meet the diverse needs of our patrons. Please contact me regarding programming at