Photo courtesy of Martin Kingsley

Six Simple Steps to Avoid Credit Problems in a Bad Economy

The New York Times ran a story today that says the next consumer crisis is credit cards — a sobering fact in a nation that has racked up massive amounts of credit card debt.

Unfortunately, when times get hard, many people turn to credit cards to help them make ends meet … and only dig themselves into a deeper hole.

I’ve been through this myself, buying things on credit when I had no other way to pay for them. I’m not talking about plasma TVs, but about necessities like medical bills. As a result, I dug myself deep into debt, and one of the biggest decisions of my life was to get rid of credit cards and begin eliminating my debt.

At the beginning of this year, I finally got completely out of debt, and I celebrated. But it wasn’t easy. It took some hard decisions, some sacrifices, and a commitment to change my spending habits.

I highly recommend that people get out of debt and stay out of debt, especially as the economy hits difficult times. It’s not a good position to be in if you lose your job while burdened with lots of debt. Better: become debt-free, with a good emergency fund and a small budget. That’s recession-proof personal finances.

Here’s how to get there in six steps:

1. Curtail spending. The first step is to stop the bleeding. If you’re trying to get out of a hole, you’ve got to stop digging first. So make the decision right now to not use your credit card except in emergencies. Cut back on your spending in any way you can, at least for now as you try to get out of debt. Consider tracking your spending for a week or two at least, writing down every purchase, so that you can see where your money is going. Some suggestions for cutting back: eating out, going out, magazines, expensive coffees or other drinks and snacks, new gadgets, non-essential clothing purchases, non-essential furniture or home purchases, to name a few. Now, I’m not suggesting that you never eat out or go out to have fun — but I am suggesting that you cut back on these types of spending. Find other ways to have fun that don’t cost as much.

2. Save an emergency fund. With the money you save from Step 1, begin saving an emergency fund as quickly as possible. Let’s say you identify $200 per paycheck that you can save from cutting back on specific spending items (as an example — your amount will vary). Now put that $200 into a savings fund each paycheck, and within 5 paychecks you’ll have a $1,000 emergency fund saved up. This is extremely important, as there will always be unexpected emergencies that come up (you have to go to the hospital, you car breaks down, you home floods, etc.) and many people will use credit cards to pay for these expenses when they don’t have an emergency fund. If you have an emergency fund, you can avoid going deeper into the hole when these expenses inevitably come up.

3. Make debt elimination a priority. Once you have a small emergency fund saved up ($1,000 is best to start with, but you can get by with as little as a $500 fund), begin channeling your extra money toward debt repayment. Make this a top priority, or you won’t get to it. That means make it your first payment each payday: set up an automatic payment at your bank where you automatically pay an extra amount to your highest-interest debt. Pay the minimum on your other debts for now, and once you pay off the highest-interest debt, put all your extra money to your next highest-interest debt … and so on, until all debts are paid off. An alternative is to pay your smallest debt first, then focus on the next biggest debt, and so on.

4. Scale back your lifestyle. While Step 1 asked you to find ways to cut back on spending immediately, there are longer-term changes you can make that will have a big impact on your spending. For example, you could trade in your large car or SUV for a smaller, less-expensive car that gets better gas mileage. You can eventually move to a smaller home and get rid of a lot of the clutter in your house that requires a lot of space. You can work at cooking at home more instead of eating out, brown-bagging it to work instead of having expensive lunches, making your clothes last longer instead of buying new clothes all the time, and deciding you don’t really need the latest computer, TV, video game system, or smart phone — the ones you have work well enough already. These changes may take time, but a commitment to scaling back can pay huge dividends over time.

5. Make sacrifices and buy on cash. This is an extremely important habit that may become the keystone to this entire plan. While many people buy on impulse and put purchases on credit cards so they can have it now, that’s rarely necessary. Rarely do you really need to make a purchase right away. A much better habit is to save up until you have enough money to buy the item on cash. Get into the habit of waiting. Sure, maybe you need new shoes, but can you wait until you have the $50 to buy them? Yes, you can. Sure, maybe you need a new computer, but can you save up the $1,000 you need for it? It’s possible. It’s even possible to make your current car last longer and save up enough to buy your next car on cash — I did this with my last car purchase (actually it was a slightly used mini-van), trading in my SUV and paying the balance on cash. The key is to wait, save up, and buy on cash.

6. Make a commitment to stay away from credit. Getting into some debt may be unavoidable — student loans, for example, or housing loans are usually seen as good debt, especially at low interest rates. Even auto loans aren’t necessarily bad debt, although as I said above, it’s possible to save up enough money to buy a decent used car on cash so you can avoid getting into that debt. But credit card debt is rarely ever desirable, for the average person. I’m not saying you should never use credit cards — obviously they are convenient for online purchases or traveling, although for these purposes you could use a debit card that’s backed by a major credit card company in most cases (I have). But my advice is to just have one credit card (cancel all the rest) and to keep the balance at $0. Only use it when you actually have the money in the bank, and then pay it off immediately. Don’t use your credit card when you don’t have the money — that will just lead to trouble. Make a commitment to doing this, and you’ll avoid credit problems and be in good shape, whether a recession hits or not.
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Six Simple Steps to Avoid Credit Problems in a Bad Economy

The New York Times ran a story today that says the next consumer crisis is credit cards — a sobering fact in a nation that has racked up massive amounts of credit card debt.

Unfortunately, when times get hard, many people turn to credit cards to help them make ends meet … and only dig themselves into a deeper hole.

Here’s how to get there in six steps:

Posted on 29 October 2008 in Finance & Family |
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Comments (49)

Josh Champagne Says:

October 29th, 2008, 19:30 pm

I heard today on the radio that consumer spending has basically stopped. People must be putting these ideas to practice. I know I have.

BusyWoman Says:

October 29th, 2008, 19:37 pm

I think there is much freedom in taking an old fashioned approach. Stick to cash, grow your own vegies and cook from scratch. These things needn’t take much time if well planned and managed.

I have recently left my job to come home and live a more sustainable, simple life. I would not have been able to do this if we were not debt free. I now feel richer than ever because I have the time to produce so many things I used to have to buy and I have time to build a strong family.
I will never get into debt again. It is a chain around your neck. Being debt free gives me the opportunity to work here and there in things that I enjoy.
For someone with a growing family, it is lovely to be able to be more family oriented.
Thanks for re-inforcing the importance of practicing restraint.

Eric Hamm Says:

October 29th, 2008, 19:45 pm

These are definitely all essential steps to take. The one that I actually enjoy doing is scaling back. I find it fun to figure out how little I need to still enjoy life. The less you own, the less things that own YOU.

I remember you mentioning your past debt and how you got out of it, so I was interested to read about your advise on the subject. Thanks for sharing and I hope you always stick to your guns and stay debt free. Eric.

johnlazy Says:

October 29th, 2008, 19:53 pm

Simple living is the key, cut-off things that don’t matter.

Brett Legree Says:

October 29th, 2008, 19:59 pm

Leo,

I totally agree with you and I am doing all of these things myself.

I have to think, though, what will happen if and when everyone really starts doing this - because so many economies in our world are unfortunately propped up by reckless consumerism.

It might actually make some things worse… :( but I guess that’s not our problem.

Leo Says:

October 29th, 2008, 20:07 pm

@Brett Legree: That’s something I thought a lot about before writing this post — that if everyone followed it, it could make things worse. But then I thought:

1. Not everyone will follow this advice. At most, a few thousand will take my words to heart and change their financial habits. Not enough to change the economy.

2. I think it’s more important that readers put themselves in a sound financial position than to overspend, get into a lot of credit debt, and be in a bad financial position just to support the overall economy.

3. When consumer spending is high, the people who benefit are mostly the large corporations, not the little guy. I don’t think it’s important to tell people to get into debt just to allow the corporations to make more money.

4. I think that while things might get worse, in the end this is a correction that was probably necessary … the economy was over-inflated because of over-inflated housing prices and too much consumer spending (leading to too much debt). It was unsustainable, and I think we should go towards a more sustainable economy that is based on sound finances for the consumer, not overspending.

I’m not an economist, so take my advice with a grain of salt. My perspective is as an individual who has been in a lot of debt and knows what it’s like to get out of debt and stay that way. It’s night and day, and I recommend everyone follow this path. If that means less consumer spending, so be it.

Great point, and I’m glad you brought it up!

Leo Says:

October 29th, 2008, 20:10 pm

@Eric Hamm: You’ve totally hit upon my philosophy — scaling back is a matter of realizing that you don’t need *stuff* in order to enjoy life … that there are better ways to find fulfillment in life … and that stuff ends up owning you rather than the other way around. Excellent points!

Brett Legree Says:

October 29th, 2008, 20:20 pm

Leo,

Of course you are right on all points and I agree with you completely. I certainly wouldn’t advocate anyone spending just to keep an artificially inflated economy up :)

I especially agree with your point #4. The Dow would be around 7800 or so if it had continued along the way it was prior to the US Fed changing the rules in 1995, if you followed the slope at the time. I think it will eventually end up somewhere around there.

We should be focusing on helping each other and creating things of value, so again I am with you. I, too, have been in serious debt and fought my way out, so I know where you’re coming from.

We don’t need all of this stuff, and buying it doesn’t enrich our lives, but it makes other people rich.

Simple Sapien Says:

October 29th, 2008, 20:34 pm

Leo, excellent financial tips. They can be very powerful when combined. It easy for me to follow all of those steps and I actually have no debt at this point in my life.

My main problem these days is my job. My career. My lack of income! I am pretty young and don’t have a degree. Trying to live and stay sane on an entry level wage is frustrating. I end up leaving my job after a few months each time because I always hate it.

Trying to find something steady is the hard part. Something that I love and that I will love for years to come… How to pick the thing you are going to master… so hard.

- Jack Rugile
Simple Sapien

funkright Says:

October 29th, 2008, 20:46 pm

Simple Sapien.. go back to school now if the degree or education will help you open the doors you need to.. complaining about it will not make it any better.

William Says:

October 29th, 2008, 21:17 pm

This is an excellent list. One way to think about personal finances is through the lens of a business: if business is losing money year after year, is it a viable business? No. Why is your own life any different?

Starting with the spending side of the equation is intelligent: it is much harder to increase your earnings than it is to decrease your spending…

Hot Alpha Female Says:

October 29th, 2008, 21:25 pm

I really believe that money management is a core part in attaining wealth.

Recently I just sat down and allocated my income. Like 10% tithing, 30% capital investment and so on.

Now when it comes to money, I no longer feel guilty when I spend in certain things.

Because I know that I have budgeted for that amount.

Being around money and dealing with it, becomes a pleasurable and enjoyable thing.

Thanks =)

Amelia Says:

October 29th, 2008, 21:27 pm

On point #5: Make sacrifices and buy on cash. This is probably my favourite point as you generally will get much better deals if you pay with cash. If you’ve got the cold hard cash in your hand, the seller will tend to be more eager to sell than if you’re going to pull out a credit card. It’s a win-win situation - you stay out of debt AND get a better deal!

Fit Bottomed GIrl Says:

October 29th, 2008, 22:00 pm

My biggest thing is brown bagging my lunch. It’s cheaper and better for me as I usually choose healthy things when I’m at home.

Marlene Says:

October 29th, 2008, 22:17 pm

Leo,

Excellent post with a lot of good advice. My husband and I have been trying to get out of debt for over a year, with little or no progress. We recently signed up for a personal finance class (Financial Peace University) and have finally figured it out.

The one tip from the class that you didn’t mention was the one tip that brought it all together for us:

Spend every penny on paper before you spend it for real.

Yes, this is making a budget, and I know that it’s not for everyone, but it is the one thing, combined with the envelope system (which you have discussed before), that finally helped us to control our spending so we can start to pay off the debt.

Thanks for the great blog. I really enjoy reading it.

A Dawn Says:

October 29th, 2008, 22:23 pm

A news caught my attention today … even in this financial turmoil, Canadian phone company Rogers doubled their profit due to heavy sales of iPhone launched in Canada July 11. It’s no wonder Rogers said, “Compared to many companies today, we’re extremely well-financed to weather a storm – even a big one,” It is worth mentioning that iPhone plans are very expensive in Canada. A basic minimum plan would cost roughly $100 a month. Some people will always waste money no matter what happens in the world.

A Dawn Says:

October 29th, 2008, 22:24 pm

Tabitha (From Single to Married) Says:

October 29th, 2008, 22:43 pm

wonderful post!! My husband and I had this very conversation recently. In addition to the things on the list, we’re also setting aside extra food and toiletries where we can so that if we need something (if one of us were to go out of work, etc.) we’d have extra food. Great tips!

Jamie | WiredParentPad Says:

October 29th, 2008, 23:59 pm

Impeccable timing, I must say…

My wife and I are reading Dave Ramsey’s “Total Money Makeover” book and are in the midst of beginning our quest to eliminate our debt. It’s a scary, but freeing feeling, knowing that some day our family will be in a much less precarious position without all of that debt looming over us.

Keep up the good work!

Your friendly Neighborhood Computer Guy Says:

October 30th, 2008, 0:20 am

I recently started a debt elimination program, mostly spurred by the computer consulting business I want to start, and your points definitely form the bedrock of my philosophy. It’s so exciting and gratifying when you really start digging in to a lifestyle of frugality and see the debt start slowly melting away, with no new debt occurring. It’s so much fun, I can’t imagine going back to my “spending more than I earn” days.

Vincent Says:

October 30th, 2008, 0:43 am

Eliminating debts is such an important move to become financially secure. Just thinking of the interest you got to pay due to the debt is overwhelming.

Cheers
Vincent
Personal Development Blogger

Joyous Living Says:

October 30th, 2008, 1:02 am

Never payed a penny on credit card interest. Before debit cards my wife and I had 1 golden rule. Never put anything on the credit card that we didn’t already have the money (in cash) backing us. That rule kept us out of credit card debt to this day.

Now we just use debit cards as that works for just our needs.

Eugene (Editor, Varsity Blah) Says:

October 30th, 2008, 1:29 am

“A man is rich in proportion to the number of things he can afford to let alone.” – Henry David Thoreau

minerva Says:

October 30th, 2008, 2:18 am

I’m totally agree with you

I think the important thing to do is stop spending your money unless you really need it.

Thomas George Says:

October 30th, 2008, 2:48 am

One might consider becoming financially literate as well.The Fed is cutting interest rates and will probably go to zero.This hurts the little guy as savings accounts will yield zero interest.But banks will not cut lending rates.The value of the US Dollar will go down and stay down for some time to come.Inflation which has been coming down for the last 20 years will rear up its ugly head sometime in 2009/2010.One might consider exchanging some of his dollars to hard assets like gold/silver.

Just my two cents,
Thomas.

Chris (from Lifestyle Project) Says:

October 30th, 2008, 4:46 am

Leo,

I think this tips are excellent for any point in the economic cycle, and I know from following your blog for the past 18months that these are things that you have always strived to practice.

I do think that the media sensationalism is the biggest problem at the moment. I have found that going on a low information diet helps reduce the worry…blissful ignorance of the daily financial issues.

Cheers,

Chris

Alistair Says:

October 30th, 2008, 7:34 am

Good post. And, given human nature, probably always timely. Moreso than usual at the moment, it seems.

Like Hot Alpha Female’s percentage budget, I’ve found one particular set of advice on this to be useful: 10% (or whatever seems workable, but not too much) of your monthly income on a sanity allowance. That, plus making 10% of your time available for doing things just for you, seem to help put everything else in perspective. You don’t feel guilty if you can keep within these limits. You are looking after yourself, your ’sanity’, at the same time as taking care of business with the other 90% of your time and income.

Sheila Says:

October 30th, 2008, 7:47 am

Simple Sapien–this is my advice to you:

Give up the myth of the Perfect Job. All jobs will have their moments of frustration, and if you quit the moment things get difficult, you’ll never develop enough discipline to make it to the point you DO want to be.

Steve Saxton Says:

October 30th, 2008, 8:02 am

You are wrong about not using credit cards, Leo.

In the eighteen years we’ve been married, my wife and I have made every purchase possible with no-annual fee, no-interest on monthly payoff credit cards that pay us a small percentage for using them.

We’ve always paid off monthly, and we’ve actualy made some money by using them (over $2500 dollars in our married history) … so they’re more efficient than cash, and it’s actually irresponsible not to use them, and poor stewardship.

You’ve confused self-control issues with what works best, and given poor advice because of your misunderstanding.

You should have said that people who CAN’T CONTROL THEIR SPENDING SHOULDN’T USE CREDIT CARDS.

Those who should, however, DEFINITELY SHOULD.

Got it?

Maria | Never the Same River Twice Says:

October 30th, 2008, 10:04 am

Leo, thanks for helping to calm people’s fears and give them some actionable steps in these crazy times. It’s pretty tough to see my boyfriend’s 65 year old dad realize that he has to work at least another 2-3 years because he didn’t shift his investments from stocks to bonds the way he should!

One of the best resources I’ve found for getting your spending priorities straight is the piece Clay Collins wrote about creating an Income Snowball. Really, everyone should read this post right now, but in brief, the process starts with figuring out exactly what you *don’t* need to do, be, or have in your life to be happy. I do this process continuously and find it really helps me clarify my actions, my spending, and my goals.

Cosmo Says:

October 30th, 2008, 11:06 am

Great advice! I have curtailed much of my spending & I just received a very low interest HELOC so that I can consolidate my CCs & pay them off quickly!

One word of advice though, don’t cancel your CCs (unless they have annual fees). Just cut them up & do not use them. Cancelling CCs hurt your credit & strangely enough, the more “available” credit you have, the better you Credit Report looks.

It’s a good solution to have an emergency fund. Who knows when your car’s engine is going to blow or when you have to pay for new glasses.

Amber C Says:

October 30th, 2008, 11:33 am

Great list. We have just starting really trying to become debt free. Fortunately, my husband’s job is pretty secure so we can really focus on gettiing out of debt without the fear of job loss.

Mike (aka Goose) Says:

October 30th, 2008, 11:37 am

Leo,

I love your ideas. I have a comment about cancelling all but one credit card. I’ve read that cancelling credit lines can actually hurt your credit score. So just be aware that there can be consequences to people closing down credit card accounts - especially if they’re carrying balances on other credit cards they may have.

There’s plenty of information about credit scores and how they work available on the web.

I love your blogs man!! Thank you!

Sean Connolly Says:

October 30th, 2008, 11:48 am

I, too, got the credit debt monkey off my back at the beginning of this year. It felt so darn good…

Kim McGinnis Says:

October 30th, 2008, 12:29 pm

I do agree credit cards can get a lot of people into trouble over-extending themselves.

In the spirit of zen living, a lifestyle of simplicity would be the remedy.

Getting out of the hole remains a problem. But, I recently came across some great advice that might help those in that situation.

Open a separate account, a Financial Freedom Account (FFA).This action is to show the Universe that you are making an effort to manage your money. Even if you only put a dollar in each week, begin to build your FFA. Then focus on its growth.

When the Universe recognizes the energy and focus you are putting on managing your limited resources, it will find ways to bring more resources to you in the form of opportunities and influential people or simply money.

If this sounds kind of “out there”, just try it, and you will be amazed. It is a physical fact that everything is energy in motion, and like energy is attracted to like energy-so use these universal laws to your advantage-you can not only get out of debt, you can amass enough for a comfortable retirement to boot!

Tess Marshall Says:

October 30th, 2008, 12:44 pm

I love the car idea. I’ve had my VW Beetle for 10 years. I paid it off in two so I’ve not had a car payment in 8 years.

My husband just bought a Pruis and paid cash for it. He gets 50 miles per gallon of gas. It’s simply amazing what one can do when comitted.

Money problems also destroy relationships. It’s just not worth it.

Neil Says:

October 30th, 2008, 13:48 pm

Very insightful post. I work in retail banking and I agree you should have a credit card for emergencies and to establish your credit rating. However, day to day I work with clients who are in debt because they have abused the credit they have access to. I assist them in creating a plan to consolidate that debt and help them pay it off. However, I counsel each of them that the work we are doing is pointless if they don’t change their ways.

I’m fortunate that I’m able to work with people and help them create a financial plan. One that has savings, retirement, and debt reduction (if required) components to it.

You point #2 is critical in my mind. Having a rainy day fund is critical to avoiding crippling debt.

Kevin Says:

October 30th, 2008, 14:40 pm

All great pointers. Also, minimize the number of cards you carry in your wallet or purse, or better yet, leave them all at home. Keep only enough cash to get you through the day. This helps you avoid impulse spending.

Pack bag lunches instead of eating out on work days. You can eat well for a couple of bucks if you plan ahead. Bring a thermos of coffee to work instead of buying expensive coffee shop brew. Little expenditures like that add up.

Michael, Go Success Now Says:

October 30th, 2008, 15:34 pm

Leo,
I definitely agree with you response to Brett on the 3rd point.
“When consumer spending is high, the people who benefit are mostly the large corporations, not the little guy. I don’t think it’s important to tell people to get into debt just to allow the corporations to make more money.”

People spend to much and don’t realize that this will turn bad on them in time. Everyone should have a plan to eliminate debt, no matter if there is or not a financial crisis.
When financial crisis hits everyone’s pocket, then they realize that spending habits should be changed, but why not changing them when economy is stable or growing. This should be a priority, no matter the financial situation.

Even the Bible tells us that everyone should share but also Save from their earnings. We should always follow the point nr. 2. I also agree with point 5 and 6.
Great article.

Celeste Says:

October 30th, 2008, 17:37 pm

Even if you’re on a low income you can still save a little bit. I got out of debt when I got an inheritance thank god, and now I have no credit card, just a visa debit card, so there’s no excuse to have one. But I’m on a low income and thought I couldn’t save. But I organised with my bank to just put $10 a fortnight into a high interest progress saver. It’s amazing how it eventually adds up to an emergency fund for bills and stuff, so you don’t miss your credit card. If I do some work or have a windfall I add to my savings and you feel so much more secure. I’m saving up for a holiday. The important thing is I think to have a separate savings account I think, that is out of mind out of sight.

Maria Says:

October 30th, 2008, 17:45 pm

I think this article is really helpful, and I think I’ve read some similar points in some of your other articles that I love, and have served as an inspiration to dig ourselves out of debt. I paid off my last credit card this week, and am completely credit card free! My husband has finally agreed to pay of his card entirely and cut it up next month when we finally have enough to pay it off completely. You can read about our journey on my blog: http://frugaliving.wordpress.com

Not having credit as an option has completely changed the way I think about the things I have as well as the things I want (or sometimes “think” I want). By having to save for it, I have to really consider if it’s actually worth having or if I’m just in a phase that sort of flows along with the popular mindset. I do hazard to say that I’ll probably still want a laptop a year from now…so it’s worth saving for.

Thanks again for a wonderful article!

Maura Says:

October 30th, 2008, 19:14 pm

This point, probably one of the most challenging, is so important: “… there are longer-term changes you can make that will have a big impact on your spending…” It accelerates the rate at which you can pay off debt in ways that are difficult to imagine when you’re buried under, and the rate at which you can build savings once you’re debt free.

@Maria - Never Same… has a good blog link to an article about increasing income. Or, as an ex used to preach, developing “multiple streams” of income. He was right, especially in times like this. This is my 2009 project.

And Leo, consumption does affect everyone, even the “little guy.” It’s just easier to see how it benefits the big corporations. That said, I’m happily in a low-consumption mode, and plan to stay that way. Thanks for another inspiring article…

dr aletta Says:

October 30th, 2008, 20:37 pm

A recovered shopaholic shared this with me, “Before I choose to buy something I ask myself, ‘Do I love it? Do I need it? Can I live without it?’

lauren Says:

October 30th, 2008, 22:32 pm

You are spot-on with the exception of your advice to cancel old credit cards. Having unused credit actually RAISES your credit score, and though we should strive to live debt-free, people will not get deals on “good debt” like a mortgage unless they have strong credit . You should seriously consider correcting this gaffe.

Jenn Says:

October 31st, 2008, 8:11 am

Great article, Leo!
@Lauren- it depends on how many unused CCs you have- too many, whether used or unused, makes it look like you have the potential to get into a lot of debt.

I agree with the no CCs thought. Studies have shown that we will spend more with the swipe of a card vs. having to hand over the hard cash. Are the points or whatever you earn really worth spending more money than you need to? Not for us.
I agree that only a small percentage of people will change their spending because consuming more and more is just so ingrained into our culture and most don’t even realize how much overconsuming they are doing.

lauren Says:

October 31st, 2008, 11:11 am

Jenn - Actually, it has to do with your available vs. used credit. If you have a large amount of available credit but haven’t tied much of it up (i.e. you have a low utilization), it will, in most cases, make your credit score higher. If you have 17 credit cards, then you should probably cancel a few. But if you have a handful of cards, you probably want to hang on to most of them, even if you only use them quarterly and pay off the balance immediately (this is my strategy so I don’t pay interest, yet my cards stay open and I am still seen by the issuer as an active cardholder).

One other very important point I didn’t make in my original post - and another problem with closing all but one card - is that the age of the credit is also an important factor. Having a card for several years and using it responsibly is far more helpful to your credit than closing a bunch of old cards.

I don’t think people need tons of credit cards, by any means. However, I think that it’s irresponsible to advise people to close all the but one, as suggested in this article.

People absolutely need to get out of debt and out of the debt cycle, but then, it’s imperative that they learn to deal with credit wisely and responsibly. Their financial futures could very well depend on it.

Mor Bastiaan Says:

October 31st, 2008, 11:30 am

I think the problem its not about credit card.
But the way we spend the money. We need to control it. Spend less than the income. cut all the unnecessary things.

Still can use the credit card for the needs while saving the cash money, or even put in to investment.
I think the best time to invest,……its Now.

Thanks

Mor

lauren Says:

October 31st, 2008, 11:41 am

Mor, I agree that the real problem isn’t the credit card. The real problem is a lack of control over spending, including the misuse and abuse credit. The most important way to avoid credit problems (or to keep them at bay once you’ve dug yourself out of debt) is to have the self discipline to use your credit responsibly, whatever that means in your particular situation.

Joshua Says:

October 31st, 2008, 22:02 pm

Great post. More people including myself need to be educated on debt and finances. I even believe along with Robert Kiyosaki and Trump that personal finance management (among other important things) should be a requirement in schools. The book “Why we want you to be Rich” is an interesting read if you haven’t already read it before.
A couple of questions if I may:
#1: Do you recommend any websites or books for more information much like the key tips you have just given?
and
#2: If you already have bad credit. Or debt now handled by a collection agency can you still set up a payment program through your bank or do you have to set it up with them (collection agency)?

Love the website by the way. Keep up the great work.
Thank you.