January 16, 2003 | By: Janet Eaton, Ag. Communications Intern

Many Kentuckians may find themselves deeper in debt after the holiday season than they expected. Taking time now to make a debt management plan will ensure that debts will get paid off as quickly as possible.

"Managing debt means you have to reassess your spending plan," said Suzanne Badenhop, Extension family and consumer sciences specialist for the University of Kentucky College of Agriculture. "People need to take a good look at where the money is going and then see where they can cut their expenses to be able to make their payments for large credit card bills."

Looking at small savings that can be taken quickly is a good starting point. For example, if the morning commute includes stopping by a convenience store for coffee, making your own coffee at home and taking it along is an easy way to reduce spending.

Subscription television choices may be another area where savings can be taken. The consumer may decide to choose a less expensive package and rent a movie or borrow them from the library now and then.

Staying focused on paying off debt while avoiding further debt will allow the consumer to see a quicker debt reduction.

"The clue to this is that you stop going into debt," Badenhop said. "You stop making purchases with your credit card. You have to alter your behavior."

Choosing the debt with the highest interest rate to pay off first is another good strategy. Once that debt is paid off, add the amount that was being paid toward that debt to the amount being paid toward the debt with the next highest interest rate.

Keeping a spending diary for a week is another tip from Badenhop. Ways to save small amounts will become more evident when this diary is reviewed. Identify those small amounts in terms of potential savings then, with altered behavior, apply those amounts to debt.

Badenhop encourages Kentuckians not to forget savings, but debt may have to be considered first.

"If you have a choice between savings and repaying debt; repay debt first," Badenhop said. "You'll come out ahead by repaying your debt first."

If consumers find their debt is more than they can manage, they may need to take further steps. High interest credit card balances may be best handled by taking out a lower interest loan at a credit union or other financial institution.

Credit card companies can be contacted and may work with the consumer by freezing the account including the interest. A payment plan can be worked out that fits into the consumer's spending plan.

If consumers find they cannot manage the debt with these strategies they can contact a credit counseling service. These services can be found by looking in the phone book under "credit and debt counseling."

Many of these services work for free, or a small fee, and will work out a payment plan with creditors.

Badenhop encourages consumers to make a plan now for the holidays next year so they won't overspend and have to manage another holiday debt.



Suzanne Badenhop  859-257-5631