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Ask Ken: Credit is choice of last resort

6:55 PM, Aug. 3, 2013  |  Comments
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I recently read a poll taken by the National Foundation for Credit Counseling (NFCC) that said that 22 percent of more than 1,900 respondents indicated they could not make ends meet without access to credit.

An additional 24 percent of poll respondents said they would have to make significant lifestyle changes if they did not have access to credit. That is 46 percent of Americans who would experience major interruptions to their financial lives if denied the use of credit. Without a doubt the inability to responsibly manage credit is one of the financial dangers still facing our society. Here are a couple of other findings from the survey:

? 33 percent of consumers do not pay all of their bills on time, the highest percentage since the question was first posed in 2008, up 5 percent over 2011;

? 39 percent of respondents indicated they carry debt over from month-to-month, a sure sign that a person is living beyond what his or her income can support; and

? 16 percent have experienced an overdraft related to a checking account.

Life's unexpected events often throw a curve to even the most stable financial plans, making credit the choice of last resort to meet monthly obligations. Many times people think living off of credit can be a short-term solution. The new job is just around the corner; the medical event won't be serious; the divorce decree will read differently. But the reality is things seldom happen the way we think they will. In some cases, people who have not experienced any financial setbacks in their lives have used their available credit to sustain a standard of living and lifestyle beyond their income.

If you take some time and look at your own personal situation, and are honest with yourself , you may find yourself being able to relate to the 46 percent in the poll.

There is a solution: Stop charging, increase income, decrease expenses. That may seem simple. And some options might not be available, like increasing your income at this time. That only leaves two options: stop charging and decrease your expenses.

First, take a look at what you are using credit for and, second, realize you are going to have to make some lifestyle changes to make a budget work. When you look at decreasing expense, don't look for big numbers. Don't cut out something completely, but consider cutting back in several areas. It will make change and the challenge of getting your finances in order easier.

Facing financial change can be hard. Changing your habits is even harder, but it will be worth the effort and is the tradeoff for your future financial stability. There are millions of credit cards in circulation and new offers flood mailboxes. The temptation to rely on plastic to maintain a standard of living can be a financial challenge to all of us. It is important to remember that credit was intended to be a convenience, not a piggy bank to supplement income.

Need answers to your financial questions? Write Ken King at 1930 N. Eighth St., Sheboygan WI 53081 or email ken.king@excel.net.

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