The average household in America spent $465 on Christmas presents in 2009. This wouldn't be nearly as alarming if it weren't for the fact that on average, that same household already had over $8,000 in short-term debt, such as credit cards and other revolving accounts. Most of these households feel pretty confident that they have their debt under control, because they are able to pay their bills and still make the monthly payments on their credit cards... But what they don't realize is that the flatscreen TV they bought at Best Buy a year ago for $1800 on a Gold store credit account still has a balance of $1720, and they've already paid $480 on the account! It's highway robbery, but it's so pervasive that almost everyone in the US has at least one account like this.
So what's the solution? Many financial analysts advocate taking a second mortgage or a line of credit such as a HELOC. But those kinds of solutions beget the same problems that you had to begin with. The fact is, sooner or later this is going to be uncomfortable, and the sooner you start to tackle it, the less uncomfortable it will be in the long run. Dave Ramsey advocates many of the things that will be mentioned here, so this is not typical crackpot advice.
The first thing Dave says you should do is evaluate your income and your bills. If you don't make enough to pay your monthly bills with the money you are currently making, you're in what he calls an 'income crisis.' In some cases this would mean you should get a second job. Next, you should go down your list of creditors and call them one by one to ask them for mercy... ask them to lower your interest rate because you've been such a good customer for so long, and you've got other credit companies offering you lower rates. Say you'd hate to have to cut their card up into itsy bitsy pieces, but you can do that if they won't play ball. Once you get that done, you start by paying off the smallest balances first. Pay the minimums on the others, but pay all you can on the smallest ones, and pay out the total of the same amount each month. This way you can snowball the payments into the larger accounts as they get paid off.
One of the most significant developments in this process was actually highlighted by Ramsey himself, when last year he publicly endorsed companies that Buy Gold Online. His reasoning makes perfect sense because getting a second job is not practical for many people, but having hardly-worn Scrap Gold Jewelry around is even less practical when it represents so much stored value today. Consider this: if you make $10/hr at your job and work 40hrs a week, after taxes you are bringing home about $270/week. If you sold just one ounce of 14k gold jewelry, you could basically take a week off from work! ...Or in this case, it's a week's pay you could put toward those credit card bills!!!
