5 Ways to Get out of Debt
WMUR-TV 9 (ABC/Manchester, New Hampshire - Boston viewing area)
19 May 2011

MANCHESTER, N.H. -- A recent survey found that New Hampshire college students have the second-highest loan debts in the country, and another credit survey found that Granite Staters have the highest percent of consumers with 10 credit cards or more.

In a society driven by spending and easy credit, debt can pile up fast, but there are ways that you can reduce debt and start saving money.

Credit counselors said improperly used credit cards can be the easiest way to get into trouble. In extreme cases, people can owe tens of thousands of dollars.

"They can have in excess of $100,000 on unsecured debt on credit cards," said Kerry York of GreenPath Debt Solutions.

According to credit agency Experian, last year, the average credit card balance in New Hampshire was $4,300.

York and Sharon Cowan of the University of New Hampshire Cooperative Extension said there are five simple ways to reduce debt.

First, consider whether you should focus on paying off high-interest debts or paying off low balances.

Both experts said that when paying off credit cards, always try to pay more than the minimum. York said paying off higher-interest cards first saves money, but sometimes focusing on lower-balance cards can be more effective psychologically.

He said it's called the snowball effect.

"You pay off smaller balances first, then you take those funds and apply it to the next larger balance," he said. "So over a period, it snowballs and you end up paying your larger balances."

Another tip is moving high-interest debt to another card with a lower interest rate. Consumers should beware of any restrictions on the new card and transfer fees.

"If you are going to spend more on the balance transfer fee than the money you'll save, it doesn't make sense to do that," Cowen said.

The next tip is something of a trick. When planning out your monthly finances, overestimate what you owe by $50 and underestimate what you make by $50.

York said that can be a good trick for people who have trouble with spending.

"At the end of the month, you would end up with excess funds in your checking account, which you can take either to save or apply toward debt," he said.

York also suggested that those who get paid weekly should save the extra week of pay they get every four months and put that toward paying down debt.

The fourth tip is simple: Reduce spending.

Cowan recommended starting by looking at everyday expenses.

"It's not just looking at your bills," she said. "It's looking at the money you spend on coffee. The money spent on the cable bill."

She said that by cutting down on eating out and gym memberships you don't use, or even only using a cell phone, you can apply the money saved to paying down your debt faster.

Finally, both experts said it's important to save. Even when focusing on paying down debt, they said it's important to put away some money in savings every month.

Saving $50 per month can add up to $600 each year. The biggest advantage is being able to pay for emergency situations with cash, rather than putting more charges on a credit card.

The experts said one of the first steps before considering any of these tips is to get organized. Write down all your bills, what you owe and when they're due each month.

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