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Managing money and debt


I recently reviewed a report from the Idaho Department of Labor which profiled Bonner County. The report confirmed that we live in an area with relatively low wages, a higher-than-average unemployment rate and impressive population growth. Many of us choose to live here because of the quality of life, the beauty and the recreational opportunities. The downside is this is a hard place to earn a living. That environment makes it crucial to understand the value of money and the importance of managing money carefully.

So how do you manage money in a low-wage, rising-expense environment? Some of the key components in managing money are creating a budget, identifying financial goals, managing debt and tracking spending. This may seem overwhelming, but if you take some time to identify your current income and expenses and write them down, it will begin to paint a clear picture of where you are today. The financial goals portion might be as simple as being able to pay all of your bills or as complex as retirement and estate planning. At least identify a few important goals; create small steps associated with your goals so you are encouraged to continue to strive toward them.

Debt management can be daunting at times. It is easy to accumulate debt and hard to pay off. Unfortunately, it is not difficult to take on excessive amounts of debt. It just takes consistently spending a little more than you make over a period of time and you will eventually find yourself overburdened with debt. By creating a budget and tracking your spending you might be able to see your way clear of some of the common pitfalls.

If debt is hampering your ability to reach your financial goals here are some ideas that might help you get a handle on your debt.  First, identify the most expensive debt and work on paying that off first; this is usually credit card debt. Credit cards generally have higher interest rates and fees, plus any interest paid is not tax deductible. The budgeting process mentioned above will hopefully help you spend within your income limits; by not adding any more debt you can create a plan to pay down existing debt. Remember to focus on paying off the most expensive debt first.

Many credit card companies offer a teaser rate to transfer a balance. This could be as low as zero percent for a limited time. You can transfer balances from your high interest rate credit cards to the lower rate card and then pay off the balance as aggressively as possible. Before getting the new card make sure you review all of the details - it is important ensure the low rate applies to the transferred balance and that there are no balance transfer fees that will offset the interest savings. Once you have paid off a credit card, close the account. Having several credit cards can affect your credit score. If you have trouble controlling the use of credit cards, get rid of them.

Another common form of debt is taking equity out of your home in the form of a home-equity loan. You might want to set up a home-equity line of credit to use for emergencies, but then make sure that it is only used for emergencies, not as a convenience. If you choose to consolidate your debt by the use of a home-equity loan, be sure you focus on paying off that debt as quickly as possible without adding other debt. 

It is also important to pay your bills in a timely manner. Having good credit allows you to qualify for lower interest rates and will help you avoid costly late fees. Try to pay your bills early instead of after the due date. This might require saving a little money from earlier paychecks to give you that ability.

It might be a struggle to earn a living in our area but I believe the quality it adds to life makes it all worthwhile. Relieving the pressure that money puts on our lives can make things easier but there are many other things that are important to our happiness. Sometimes we just need to spend a little time reflecting and prioritizing the important things in life.

As you begin to reach your debt reduction goals, give some thought to the future. The money you once paid in credit card interest—money which benefited only the financial institution issuing the card—can be put to work on your own behalf. The establishment of financial vehicles to fund your retirement, like IRAs, or special bank accounts to fund medical expenses not covered by insurance or college costs for your children can make a big difference down the road. A little time spent with a financial advisor or tax planner can help you move from a life loaded with debt to one loaded with opportunity.

Nancy Hadley is an investment representative with D.A. Davidson in downtown Sandpoint. She is currently accepting new clients—reach her at 208.263.2010.



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Nancy Hadley

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debt reduction

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