United Way 2-1-1

Ask 2-1-1

Q. I got a little carried away and overspent my holiday budget. Now, I have more credit card bills than money. How can I improve my financial situation?

A. Kudos to you for creating a holiday budget in the first place. Setting a budget is often much easier than living it out, but you are ahead of the game because you already realize there is a problem.

How much debt is too much depends on how much money you make (income) and how much money it costs you to live (expenses). Experts say that you should spend no more than 20% of your take-home pay to repay debts to creditors (excluding your house payment). For example, if your paychecks add up to $1000 per month, you should spend no more than $200 per month to pay off loans, car payments, credit card bills, etc.

But you may decide that is too much. If you are unable to do the things you want because you're still paying old bills or can't meet your basic living expenses, it may be time for you to develop a plan to reduce your debts.

Here are some steps you can take right now to improve your situation:

  • Stop spending money you don't have.
    If you keep spending, you'll dig yourself into a deeper hole. Think about your budget. If you don't have one, now's the time to make one.
  • Make the minimum payments, on time.
    Make the minimum payments on time, if you can't pay the balance in full.
  • Try paying more than the minimum payment.
    The more you are able to pay on a bill - the less time it will take to repay and the less you will end up paying in finance charges.
  • You don't have to do it by yourself.
    If you are behind in your payments and can't pay your current bills, call a credit-counseling agency right away. They can contact your creditors, explain your situation, and work out new arrangements.
  • Get help repaying your debt from a nonprofit program.
    Non-profit credit counseling agencies can really help you get back on track. Don't use agencies that charge for their services and spend a lot of money on advertising. They usually charge very high fees - and provide the same or similar services.

For more information about local credit counseling agencies or any topic, dial 2-1-1. United Way 2-1-1 helps people find and give help. We make it simple. If you have a question for United Way 2-1-1, please call our 24 hour information line or email your question to 211@unitedwaytriangle.org. We can help you find the help you need.