Back on Track - If getting out of debt seems like a never-ending journey, here are some tips to get you heading in the right direction.

by Amy Gage

In the five years that Emily Reed has been tossing life preservers to people who are drowning in debt, she has noticed one constant: They generally come to her too late. Male or female, young or old, prosperous or poor, her clients typically have procrastinated long enough that a ripple of debt has escalated into a tidal wave.

“Most people are embarrassed and don’t want to reveal financial information to someone they don’t know,” says Reed, a group manager and financial counselor at GreenPath Debt Solutions in Flint, Michigan, and a Thrivent Financial for Lutherans member. “So they try to Band-Aid the problem and assume that things will get better over time. That can get out of control really quickly.”

Millions of Americans are living beyond their means. But consumers can tame their spending habits if they’re willing to limit their use of credit, learn to recognize the difference between wants and needs and, perhaps most important, ask for help.

Follow the Money
“Information is empowering,” says Jill Aleshire, director of consumer banking for Thrivent Financial Bank. “Start by really understanding where you’re at. What’s coming in, what’s going out.”

Many people understand the “high-level” numbers: their salary or hourly wage, their mortgage and car payments. “But take a deeper look,” she says. “If you take $20 out of the ATM every few days, what is it going toward?” Those withdrawals, while small, add up and can be budget busters.

At GreenPath Debt Solutions, every client starts by building a detailed budget. “It’s not just how much debt you have, but what you spend on groceries and gas and everything in between,” Reed explains.

Track your spending, Aleshire advises, by carrying a notebook and jotting everything down or using a software package such as Quicken or Microsoft Money. Experts also recommend paying bills online rather than writing checks.

“Online banking can help you better track your expenses because you can see your transaction history any time, monitor your cash flow and avoid late payments,” says Christine Cousineau, chief financial officer, product development, at Thrivent Financial Bank. “If you’re set up for recurring payments, you also know your bills always will be paid on time.”

Find the Right Resource
If you’re overwhelmed by debt, ask for help, the experts say, even—or especially—if it’s hard to do so. Start by talking with a friend or relative who appears to manage money well, says Reed, and see if that person can offer advice and encouragement. On a professional level, a personal banker at a credit union or bank can suggest strategies for consolidating debt or creating a workable payment schedule. Credit counselors also are used to dealing with people who are having financial difficulty, and the good ones are trained to do so without judgment or reproach. You can find a credit counselor certified through the National Foundation for Credit Counseling (www.nfcc.org). The best agencies are not-for-profit operations that charge their clients only a modest monthly fee and are subsidized in part by contributions from creditors.

Analyze Your Debt
To get out of the hole, you have to know how deeply you’re in it. Reed asks her clients several questions: “How much do you owe? What interest rates are you being charged? Do you have student loan debt or car payments?”

Ask a counselor or advisor about debt acceleration, a process that helps pay down your debt efficiently, rather than moving it from one credit card to another. “You want to pay your highest-interest bills first. If you make just the minimum payment on credit card bills, it will take you forever to pay off your debt,” Cousineau explains.

Cousineau advises people to be proactive. “Contact your creditor if you’re going to be late. Ask credit card companies for reductions in interest rates. And avoid new credit,” she says emphatically. Cousineau also urges consumers to learn to differentiate a “need” from a “want” by forcing themselves to walk away when they’re tempted to make a purchase and wait for several days to see if they can live without it.

Establish Good Habits
Dieters will gain weight if they return to old eating habits. Similarly, overspenders or people tempted by credit have to change their ways to develop healthy spending behaviors. Among the advice from our experts: Don’t shop for recreation or to make yourself feel better; spending to feel better is only a temporary fix and won’t help you meet your long-term goals. Set even moderate financial goals—to open a savings account, for example, and have money automatically transferred into it every pay day—and stick to them. Carry a list of what you plan to purchase when you go shopping. Perhaps most important, pay cash. “Studies have shown that people who pay with credit cards spend 15 percent to 25 percent more,” Cousineau says.

Building a strong financial future isn’t easy. “It’s all about making choices,” Aleshire says. She urges people to set long-term goals and then make daily decisions that will help them realize those dreams. “We all make compromises in our lives,” she says. “There’s always some give and take. You have to give up what’s not quite so important in order to have what you really value.

Amy Gage is a freelance writer based in Northfield, Minnesota.

Be Debt-Free
For more information on debt, see “Outsmart the Debt Monster” or “Empty Pockets.” You also can contact your Thrivent Financial representative. His or her contact information can be found at www.thrivent.com/locate.