Finance Education Pays Off

Finance Education Pays Off

(ARA) - The proportion of American families carrying an average credit card balance of $5,100 rose to 46.2 percent, according to the 2004 Survey of Consumer Finances conducted by the Federal Reserve Board. Many people may not realize how debilitating this type of credit card debt can be.

"Credit cards are good tools for people to build credit as long as you know how to use them," says Eric Justason, director of marketing, Genesis Financial Management. "It's very important to pay off the balance every month. One you start carrying a balance, your risk of future financial troubles increases ten fold. If you get sick, experience job or income loss, the debt can easily spiral out of control."

If you have a loss of income and your minimum credit card payment becomes a struggle, the first thing to happen is late payments, followed by missed payments, which cause all your cards' interest rates to increase. Then minimum payments increase and it snowballs from there into financial ruin that can take a lifetime to recover from.

"I purchased a house when the market was good," explains Dale Winslow of Tampa, Fla. "I had credit card debt and student loans and thought I could pay them off when I had some equity in the house. Then I lost my job. I started making late payments and even missed a payment or two. In a few months, my interest rates went up, my credit score went way down and there was no way I could catch up. I was very near losing my house. It was the scariest position I've ever been in."

"The first step to good personal financial management is education -- you need to learn the right steps to take," says Justason. "Always pay the balance in full, save money, follow a budget and spend less than you earn. It's never too late to learn how to do it right."

Here are some of your options:
1) Loan. Get a loan to pay off credit card balances, but beware of the fact that this doesn't break the habit of credit card use. If you continue to use your credit cards, then you'll have both credit card and loan payments.

2) Home equity. Using home equity to pay off credit card balances can be dangerous. It reduces the investment value of your home, and if you're late or delinquent on payments, puts your home in jeopardy.

3) Credit counseling. Enrolling in a debt management program helps you manage your debt by consolidating all your payments into one monthly payment, and most major creditors support this program as an effective way to get credit card debt under control.

The Genesis Debt Management Plan is a program that works with creditors to manage your past due accounts, lower your monthly payments and reduce your interest rates so you can get out of debt and keep it that way.

Included in the program is personal financial education. Learn how to establish a budget, watch spending habits and grow savings; gain information about credit reports and scores, identity theft, home buying, bankruptcy, financial planning and money management services. Learn how to save for college, and for retirement. Through their eLearning Center, you'll find links for Web resources, newsletters and calculators to view your budget or payoff process.

"Our mission is to provide world-class financial education to support the community in all walks of life," continues Justason. "Credit card companies are money making machines. We want to caution people and let them know that credit cards, when used without the proper education, can rob you of your future. Paying credit card interest instead of contributing to your retirement savings creates a tough future for a generation that may not have social security benefits to rely on."

Genesis Financial Management is a non-profit credit counseling agency that specializes in education and debt management services to clients experiencing financial difficulty. They provide educational curriculum, literature and seminars to carry on their organizational mission to improve or develop consumers' financial capabilities.

Another word of advice from Justason: "Avoid giving your kids everything they want. You don't have to always keep up with the Joneses."

For more information visit www.yourgfm.com or call (877) 205-5179.

Courtesy of ARAcontent