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Resolve to get fiscally fit

Voices of the clarion

Posted: Sunday, January 16, 2005

After pounding down an atypical number of chocolates and a delightful array of favorite Christmas cookies, January often is a time for resolving to become more physically fit.

Whether it's embarking on a new diet, pledging to combat the additional bad cholesterol by taking on more physical exercise or joining the newest, shiniest health club, the goal is an admirable one.

The accumulation of added year-end debt, due to extra generous gift giving or Christmas holiday travel, however, calls for another fitness plan — that of becoming fiscally fit.

Like many people, I usually approach the Christmas season with the best intentions. I start with a few decorations around the house that always include setting up a Nativity scene with figurines I've had for years; I send Christmas cards to friends and family; and I shop for a few presents for those especially close to me.

None of that sounds extravagant or expensive, unless, of course, I overdo it with gifts or toss in a plane trip to see relatives Outside. Without being careful, the trouble can start.

Budget as I will, the impulse to go overboard with a particular gift or the expense of airfare can wipe out my financial strategy with the swipe of a credit card.

Try as I like to refrain from using the card at Christmas time, if that does happen, I get the bill in January and launch a fitness plan to eliminate the debt.

Overspending for many can spell financial crisis, especially if it is coupled with personal or family illness or the loss of a job.

The crisis can be overcome, however, before a bad situation becomes worse.

The Federal Trade Commission offers a few tips for consumers to help them take control of their financial situation.

Before going out and getting professional credit counseling or filing for bankruptcy, there are a number of steps people can take to help themselves out of debt.

Honestly evaluating the situation can best be done by developing a budget. This will show precisely how much money is coming into the household each month and how much is going out either as fixed expenses or those that vary.

Fixed expenses are bills that don't change: the rent or home mortgage payment, a car or truck payment, insurance premiums.

Next on the list, the FTC suggests, should be expenses that do vary, things such as dining out, new clothes or recreation.

Once the list is complete, including even seemingly insignificant recurring expenditures, spending patterns will be easier to track and necessary expenses can be identified. The other spending can be prioritized to line up with the amount of money coming into the picture each month.

Much has been written about budgeting and is available at the public library, in bookstores and on the Internet. Computer software programs also offer guides to better money management, budgeting and balancing a checkbook.

If the situation has passed the stage at which budgeting solves the problem and the creditors are at the door, the FTC recommends contacting the lenders directly. Often when they know why a person is having trouble making ends meet, they will work out a modified repayment plan that reduces payments to a more manageable level.

This tactic works if the creditor is contacted before an account has been turned over to a collection agency. By that time, the creditor has given up on the debtor.

If the account already has been turned over to a debt collector, the person in debt should know that he or she has certain rights. Under the Fair Debt Collection Practices Act, collectors may not harass the person in debt, may not phone before 8 a.m. or after 9 p.m., and may not bother the person at work if the collector knows an employer does not approve of such calls.

Collectors also are required to honor a written request to stop further contact, according to the FTC.

Some loans are secured by assets such as a car or truck if its an auto loan or a house in the case of a mortgage.

Automobile financing agreements customarily allow the lending institution to repossess a vehicle without notice anytime the borrower is in default on the loan. To get the vehicle back, the borrower will have to pay the balance due on the loan plus any towing and storage costs incurred during repossession.

According to the FTC, it may be better to sell the vehicle and pay off the debt if repossession is imminent. That will allow the borrower to avoid any repossession costs and a negative entry on his or her credit report.

Mortgage companies are not generally in the position of wanting to own a bunch of houses, so they will work with borrowers to avoid foreclosure if the situation is temporary.

Payments might be reduced or suspended for a short time, or terms of the mortgage could be altered to reduce the monthly payments required. The FTC cautions, though, that some of the adjustments might result in additional fees. People should ask.

Unlike New Year's resolutions about physical fitness that often fizzle before Easter, people should stick with the resolve to improve their fiscal fitness.

Once the debt becomes manageable or is removed, people can start adding to savings, which could preclude the uneasiness of being burdened with debt in the future.

More information on consumer issues can be obtained by calling the FTC toll-free at 877-FTC-HELP, or online at www.ftc.gov.

Being fiscally fit can feel as good as being physically fit.

Phil Hermanek is a reporter for the Peninsula Clarion.



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