A Guide to Financial Fitness
Lose that Debt
A Guide to Financial Fitness
Table of Contents
Set a Benchmark.......................................... 2
1—Know Your Cash Flow............................ 3
2—Emergency First Aid.............................. 4
3—Looking Down the Road to Recovery.... 5
4—Know What You Don’t Know................. 6
5—It’s a Marathon, Not a Sprint................. 6
Possible Pitfalls............................................ 7
Hitting Your Stride....................................... 8
Budget Worksheet....................................... 9
Set a Benchmark
Before you can get to where you want to go, you have to assess where you are. So where are you? Check the statements
that apply to you:
● I pay only the minimum amount due on bills
● I often pay bills late and incur late fees or penalties
● I don’t have a savings account
● I do have a savings account, but it has less than $100
● I often fight with my significant other about finances
● I pay for most things with credit cards—rarely cash
● I don’t know my net worth
● I don’t know what bill I should pay first
● I don’t know my credit score
● I have a poor credit score
● I’ve gotten turned down for credit cards or for
● I’ve used credit card cash advances to pay down
● I’ve maxed out my credit cards or am very close to
● I have creditors calling me at home and at work
So, how’s your financial health?
0-4 items checked.
You could benefit from
making some lifestyle changes.
5-9 items checked.
Things are heading into
the danger zone…
you need to turn things
10-14 items checked.
Your finances are flatlining—
get the paddles!
But take heart! Every day is a new day to start making good choices
that will pump new life into your net worth. Read on and learn about
the mile-markers you’ll encounter during your race to dump your
debt and finally take control of your finances.
Stop beating yourself up!
You’re not the first person to get yourself into financial straits.
Everyone has made less-than-wise choices. Your situation could just
be a temporary setback or a tough-to-tackle problem. It could be
entirely your fault or no fault of your own. The point is, this too shall
pass if you strive for and reach the five mile-markers that follow.
Race roadblock: If you only make minimum monthly payments on
a $2,000 credit card balance with an 18.9% APR, it will take you 22
years to pay it off. You’ll have paid $4,688 in interest alone!
Know Your Cash Flow
To achieve financial fitness, you need to note where your
money goes every month. Keep track by using the worksheet
in the back of this booklet.
1. List monthly income
2. List monthly fixed expenses like rent, mortgage,
3. List monthly expenses that fluctuate like food,
entertainment, clothing, etc.
Subtract your expenses from your income. If you get a
negative number or are left with just a few dollars, you’ll be
able to spot the spending habits you need to curb.
You should also get a copy of your credit report and credit
score. This will give you a baseline from which to work. The
reporting agencies are:
• Equifax: www.equifax.com
• Experian: www.experian.com
• TransUnion: www.transunion.com
As with any fitness plan, the quick-fix
approach never delivers quality
results that last. That’s why you
should steer clear of filing for
bankruptcy. It can mar your record
for up to a decade and adversely
affect your job and loan prospects.
It’s also a legal case, which makes
it public record and very easy
to find on Google.
Emergency First Aid
Stop using credit cards: Your monthly debt payments
(credit card balances, loans) shouldn’t exceed 40-45% of
your take-home pay. You need the rest for food, clothing,
utilities and other expenses.
Set up a plan, then work the plan: You will pay off debt
faster if you target those with the highest interest rates
first, but there is a sense of accomplishment if you knock
off a couple of smaller debts first, one right after the
other. From now on, try to pay more than the minimum
monthly payment. This way you’ll cut down on the
principal and interest payments faster.
Cut up your credit cards: Sound drastic? It isn’t, really.
Be honest—if you could handle them responsibly, you
wouldn’t be reading this booklet. So get rid of them,
but don’t close all your accounts—you need evidence of
a credit history.
When debt collectors become bullies
You may have fallen behind on payments, but you’re
still protected from unethical collections by the Federal
Fair Debt Collection Practices Act. Under this law,
Here are a few quick fixes to breathe some life into your
Do’s and Don’ts of Closing Credit Cards:
• Close the card with the highest interest rate.
• Close unused and idle credit card accounts.
• Keep one card and pay off the balance every month.
• Check your credit report to ensure the account has
• Close your oldest credit card account. It could make
your credit history appear shorter.
• Close multiple accounts at once. Instead, pay them
off and close them one by one.
• Over-consolidate balances onto one card.
An unbalanced debt-to-income ratio could drop
But if you do close an account, notify the credit card issuer
in writing. Make sure they mark the account “closed by
the consumer,” otherwise someone viewing your credit
report might think the card issuer shut it down.
Realize emergencies do happen: Sometimes a credit
card really can get you out of a bind. If you plan to keep
using credit, just keep one card for emergencies and
pay the balances in full when statements come in.
Keep in contact: If you know in advance you won’t be
able to pay your creditors on time, contact them. If you
default on a loan, it will affect your credit score and your
ability to get credit for years to come. Explain your
hardship and that you’re trying to be responsible. They
may be able to work out a payment plan for you until
you get back on your feet. You can also visit a CDC FCU
branch and speak with a manager about your finances.
They can assist you with your monthly bills and build a
budget for you to work from.
• Call you before 8 a.m. or after 9 p.m.
• Threaten violence or curse at you.
• Make false statements like “I’m an attorney and you’ll
be arrested and thrown in jail if you don’t pay what
You can also send them a written request to stop
contacting you. They have to honor it.
Other “quick fixes” to avoid:
Check-cashing stores: These shops will charge you a
flat fee or a percentage of the check’s value, whichever
is greater. Instead, deposit your checks in your checking
account and use your debit card to access cash when
you need it. Plus, CDC FCU offers free debit cards and
Payday loans: This is the worst of the offenders. These
people advance you the amount of your paycheck and
then charge short-term rates and astronomical fees that
can exceed 500% on an annualized basis.
A typical payday loan ripoff:
Looking Down the Road to Recovery
This part of the race is a little hilly—you’ll face your
credit score head-on and set up a spending plan.
Why is my credit history and credit score important?
Whenever you fill out a loan application for a house,
a car or tuition, the first thing the financial institution
will do is run your credit. Your income, assets, length
of employment, length of residence in one place and
your education level will also be examined. All of this
information is used to see if you’re a good credit risk.
Borrowers with high credit scores are usually offered
lower interest rates, which can translate into thousands
of dollars in savings over the long haul.
Three different credit bureaus independently track your
credit record, which shows:
• Personal information
• Credit information
• Public records
• Credit inquiries from those who have requested a copy
(i.e. financial companies)
Sometimes these bureaus get and hold on to
inaccurate information. It’s important to review all three
reports at least once a year and correct any mistakes.
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Get your credit report: You can get your credit
report from all three bureaus once every
12 months—free—by calling 877-322-8228 or
going to www.annualcreditreport.com.
Working Out a Spending Plan
If you haven’t yet, complete the worksheet we talked
about back at Mile-Marker 1. Then:
• Identify short and long-term goals: It’s important to
be a grown-up here and clearly distinguish “needs”
(food, shelter, transportation) from “wants” (dining
out, vacation, bigger TV).
• Identify bill due dates and when you’ll pay them:
Do you get paid weekly, biweekly or monthly? Get a
calendar and schedule them. If too many bills occur
at the beginning or the end of the month, call your
creditors—most are willing to change dates to
accommodate your budget.
You’re finally on the path to shedding debt!
Congratulations! But financial fitness also has another
component—savings. Whether it’s $5 a month or
$500, just start saving for an emergency fund or a
future financial goal like a car, house or vacation.
At CDC FCU, you can easily open a savings account and
painlessly have money automatically transferred from
your checking account every month. We have many
solutions to help meet your savings goals.
Want to build your savings, but can’t seem to get
traction? Here are a few ways to find extra cash fast:
• Store money you save from coupons and rebates.
• Sign up for your employer’s tax-sheltered savings
plan, such as a 401(k). Contribute enough to get
the full “match” offered by your employer. You’ve
just doubled your money!
• Get a bump in salary? Put the extra right into
savings and keep living off your old income.
Know What You
Plenty of people have problems managing their money,
and that’s OK. If you try your best to get back on track
but still despair of ever crossing the finish line, call CDC
FCU. We offer free budget counseling.
Can’t face your creditors alone? There are low-cost
credit counseling agencies and debt negotiators that
will evaluate your situation, set up a budget and
mediate on your behalf for repayment of your debts.
What to look for:
• A non-profit agency that charges no or low fees
• A full description of services
• Certified Credit Counselors (www.cccsatl.org)
• Confidentiality agreements
• In-person counseling
• National Foundation for Credit Counseling
If you need emergency assistance, try:
• The American Red Cross (www.redcross.org)
• The church
• Your workplace employee assistance program
• Local utility funds
• Local government aid
• Local unemployment commission (if eligible)
It’s a Marathon,
Not a Sprint
It’s one thing to get out of debt, it’s another to STAY out
of debt. To do that, you need to rid yourself of the
bad habits that got you in trouble in the first place.
Here are a few suggestions to keep you on the straight
• Try to keep most of your accounts with one financial
institution so you can easily move money between
accounts. CDC FCU offers everything from online
banking to bank-to-bank transfers and even person-toperson transfers.
• Use an online bill-paying service or arrange to have
bills paid automatically.
• Have part of your pay automatically transferred to your
• Be smart! Only buy things you can afford.
• Stay on top of your credit report and make sure
negative information is removed as you pay off debt.
• Enroll in a credit monitoring service.
• Avoid unnecessary creditor inquiries on your report.
Too many seem desperate to lenders.
• Stick to your budget. As you pay off debt or reach
goals, your budget will change too. Reevaluate
often to keep your spending on track and your goals
You can’t dump debt and clean up your credit
overnight, but some unscrupulous companies will
tell you otherwise. The Federal Trade Commission
cautions against companies that:
• Make you pay them before providing credit
• Don’t tell you your legal rights or what you can do
for yourself for free
• Recommend you don’t contact a credit bureau directly
• Advise you dispute all information on your credit
report or take any action that seems illegal, such as
creating a new credit history
Remember to stick to your plan and work at it every day.
In time, you WILL dig yourself out of debt.
No one thinks they’ll be a victim of identity theft—
until they are. Thieves steal your credit and personal
information, then use it to commit fraud or theft. Their
actions can ruin the credit record you’re trying so hard
• Don’t give your Social Security number or credit
card information to anyone over the phone unless you
call them, know the caller or are sure the organization
• Never provide personal or credit information in an
email or on an unsecured web site.
• Never have your Social Security number printed on
your checks or your driver’s license.
• Don’t carry your Social Security card in your wallet.
• Limit the number of ID and credit cards you carry.
• Use only your initials and last name on your printed
checks, but sign with your full name.
• Never give your PIN to anyone.
• Don’t leave mail in an unsecured mailbox overnight.
• Enroll in e-statements to eliminate mailbox ID theft.
• Review your credit report at least once a year.
• Shred copies of anything with sensitive information.
• Check financial statements for accuracy.
• Call the post office if you notice your mail is missing.
• Be aware of your credit card expiration dates, and
notify the card issuers if you don’t receive a
• If you were approved for a credit card but haven’t
received it, call the issuer.
• Enroll your credit and debit cards in a password
protection program such as Verified by Visa® or
If your identity is stolen:
• Keep records of conversations.
• Keep copies of correspondence and reports.
• Have all three credit bureaus put a fraud alert on
• Contact your financial institution. Close compromised
accounts, open new accounts with new PINs and
• File a complaint with the Federal Trade Commission.
• File a police report.
• Call the Social Security Administration at 800-269-0271
to report fraudulent use of your SSN.
• Get a new driver’s license and number.
• Contact your nearest U.S. Postal Inspection Service
office if the mail is involved.
Hitting Your Stride
Hitting your stride
So you’re back on your feet and your financial health
is better than ever. The best way to keep fit for life is
to follow a budget. There’s no better way to evaluate
where you’ve been, where you are and where you want
to go. Life will change—people get married, have
children, buy homes, retire and travel—so your budget
should change with it.
There’s no guarantee you won’t get bumps and bruises
in the future, but now you know how to get back on the
road to recovery.
Set up a spending plan:
• CDC Federal Credit Union:
• Federal Citizen Information Center:
www.pueblo.gsa.gov, click on “Money”
• National Foundation for Credit Counseling:
• The Center for Debt Management:
Protect your identity:
• Federal Trade Commission:
• Privacy Rights Clearinghouse:
• U.S. Postal Service:
• Identity Theft Resource Center:
Visit www.cdcfcu.com for complete descriptions
of all products, services and articles on topics of
financial interest. Sign up for our monthly
newsletter for more tips and articles.
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