Just after the holidays may seem like the worst time to discuss consumer debt. But maybe it's the best. If you're living paycheck to paycheck, concerned with mounting student debt, struggling to save for retirement or unsure of how to make a proper budget, consider finding a qualified, experienced credit counselor in the new year. By looking your finances right in the eye, you could come away feeling empowered and on your way toward financial freedom.
Consumer debt has reached new milestones in recent years. According to the Federal Reserve, it rose to $12.73 trillion in the first quarter of 2017, which exceeded its peak in the third quarter of 2008. The share is split between housing (71.4 percent), student loans (10.6 percent), auto loans (9.2 percent), credit cards (6 percent) and other debt (2.9 percent). Though this suggests that Americans who struggled during the Great Recession have repaired their credit, borrowing also signals increased risk, and other factors like divorce, medical expenses, financial illiteracy and lack of employment can easily make debt management more difficult.
Financial freedom is simple but not easy. Whether you have a tendency to overspend on impulses or not put money away for unexpected expenses, a sound budget is the most important thing. "You can't do anything else -- get out of debt, save for emergencies, plan for retirement -- until you have accounted for every penny of your income and all your expenses," he says.
Before reaching out to one of the thousands of credit counselors across the country, it's best to know exactly what type of assistance you seek. In an article for the NerdWallet website, writer Sean Pyles recommends writing out your financial problems and goals, as all certified counselors can help with simple budgeting, but other needs like bankruptcy counseling or student loan management may require specialized training. Once you've narrowed down your goals by importance, begin your search for the perfect agency. The National Foundation for Credit Counseling is the nation's largest nonprofit financial counseling organization, and its website offers a localized search tool to help you find a nearby agency. The U.S. Department of Justice website also has a search tool for agencies vetted by the federal government.
With your list of potential agencies in hand, double-check their qualifications. The Federal Trade Commission recommends reaching out to your local consumer protection agency or state attorney general to learn of any agency consumer complaints. The Federal Communications Commission has found that some organizations have defrauded people, so taking this extra step will give you insight into an agency's trustworthiness and the experience you might have working with it.
After your background investigation, it's time to interview counselor candidates. Call the agency and set up a preliminary meeting, or request a phone call with a counselor. The FTC suggests asking some of the following questions:
--What services do you offer?
--Do you offer free educational materials?
--What are your fees?
--Will I have a written agreement or contract with you?
--In addition to assisting me with my immediate problem, will you develop a plan for me to avoid other problems in the future?
If you're considering enrolling in a debt management program, here are some FTC-suggested questions:
--Could you tell me how your DMP works?
--How often could I get a status report on my accounts?
--Could you lower or eliminate finance and interest charges?
--What debts are excluded in the DMP?
Take your time with this process, as you may end up building a long-term relationship. Your counselor should not only have the skills to support your needs but also have your best interest in mind and an approach that works for you.
Though debt management is not guaranteed to be a quick and painless journey, it is a blessing that will lead to more freedom to enjoy your money and peace of mind in being able to handle life's curveballs. Don't wait. Start today.