Evaluating Your Debt

Money concerns can lead to many issues, including, but not limited to, relationship strain, health problems, and even depression. Some of the most common debts are credit cards, student loans, auto loans, mortgages, and medical debt. Assessing your financial situation is important, and while it may not always be pleasant, it can give you a good starting point for paying off your debt and improving your quality of life.

While it is ideal to be completely debt-free, it is important to be aware that there are good debts and bad debts.

Good debts are debts that can potentially increase your net worth and benefit you in the long run.

Mortgages are a great example. As you pay down your mortgage, there comes a time when your home is worth more than you owe. This allows you to sell your home for a profit or even refinance your home at a lower interest rate, which could potentially save you a great deal of money in the long run.

"Bad debt" is money owed that will not improve your net worth. Credit card debt, new car loans, debt for jewelry, or installment-based payment plans for goods are all examples of bad debt.

Many people struggle with bad debt. So what do you do if you are one of them?

The first step is to take a step back and breathe. There are legitimate solutions to your money problems. It may be difficult, but it will be worth it once your bad debt is gone forever.

Now that you know there are solutions out there, the next step is to assess your situation.

Family Credit Management is a non-profit credit counseling agency that has great, free, tools that you can use to help assess your situation.

The "How Serious is my Debt" quiz, at www.familycredit.org/how-serious-is-my-debt, can help you assess your situation from an objective point of view.

The certified credit counselors at Family Credit Management will be able to analyze the results of the quiz and help you come up with a plan of attack, even if the debt management program would not be the right fit for your situation.

You can find additional resources, such as a personal finance course, savings tips, a personal spending plan outline, and even a children's book created to help talk to your children about finances, at www.familycredit.org/resources.