WASHINGTON, DC, Nov 12 (MARKET WIRE) --
The New Financial Realities: Personal Statement by Eleanor Blayney,
CFP(R) Consumer Advocate for the Certified Financial Planner Board of
Standards (CFP Board):
In the current financial crisis, we have learned that we can no longer
afford to borrow as we did in the bubbly pre-recession days. There are new
financial realities; we must re-examine some basic assumptions and
consider some new approaches. Over the course of this series, we are
looking at nine important financial strategies. This week: Learn the
difference between good debt and bad debt.
The difference between good debt and bad debt is simple. Good debt exists
when you borrow money to finance assets that will appreciate in value in
the long run, such as education, homes, and businesses. Bad debt is
borrowing money to purchase depreciating items to enjoy in the present and
having to pay for them in the future, long after these items have been
used, worn, enjoyed, or discarded. Once you determine when it makes sense
to borrow, it's just as important to manage the money you borrow.
The average American household has more than $8,000 in credit card debt.
If the minimum amount is being paid towards your total balance every
month, it will take nearly a decade to pay off. Although one may think
minimum payments are better than no payments, this approach to debt
payment can still sabotage your financial future.
Here are a few strategies on managing your debt effectively:
-- Start by knowing your FICO score, which is used by lenders to decide
if you are financially able to repay a loan back given your credit history.
FICO scores have become very powerful in the last few years. They
determine not just your cost of borrowing, but your ability to get a loan,
a job, a lease, even your insurance premiums. If your FICO score is
limiting your financial options, you need to take aggressive steps to get
it in the good credit zone.
-- Create a debt payment plan; getting your balances down should be the
overall goal. Cancelling accounts or transferring balances is not the best
way to manage your debt.
-- Read the fine print. It is important to read and know the terms on
credit card, mortgage and car loan agreements. Creditors are required to
provide this information and to notify you when there is a change in the
terms, but often this notification is easily missed in the fine print.
As the Consumer Advocate for CFP Board, I want you to remember not to
borrow trouble. Managing your debt is every bit as important as managing
your investments for your financial future.
To view the new financial realities series, please visit
http://www.cfp.net/learn/advocate.asp
Eleanor on Twitter: http://twitter.com/EleanorBlayney
Eleanor on FiLife: http://www.filife.com/user/eleanorblayney
Eleanor on LifeTuner: http://www.lifetuner.org/users/eleanorblayney
About CFP Board:
The mission of Certified Financial Planner Board of Standards, Inc. is to
benefit the public by granting the CFP(R) certification and upholding it
as the recognized standard of excellence for personal financial planning.
The Board of Directors, in furthering CFP Board's mission, acts on behalf
of the public, CFP(R) certificants and other stakeholders. CFP Board owns
the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(TM) and
federally registered CFP (with flame design) in the U.S., which it awards
to individuals who successfully complete CFP Board's initial and ongoing
certification requirements. CFP Board currently authorizes more than
60,000 individuals to use these marks in the United States. For more
about CFP Board, visit www.CFP.net.
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CONTACT:
Chris Wloszczyna
Director of Public Relations
CFP Board
P: 202-379-2252
E: cwloszczyna@CFPBoard.org
Stacy Dimakakos
Grayling
P: 646-284-9417
E: stacy.dimakakos@us.grayling.com
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