Debt Can Be Bad for Your Health (cont.)

"At that point," Cavazos continues, "I might say, 'Well, you are short $750 a month.'" The question then becomes, how do you increase income, decrease spending, or both?

"The clarity of doing this," says Langemeier, "creates calm. And from going from chaos to calm creates confidence."

Wealth Plan

"You need not only a debt plan, but a wealth plan," Langemeier contends. While consumer credit counselors will work with certain creditors, such as the major credit cards, to cut your interest and consolidate your payments into a single payment, you may simply need more money as well.

"Being $40,000 in debt," Langemeier says, "is like being 40 pounds overweight. It is a result of overconsumptive behavior. You have to face that."

Once your spending plan is in place (both counselors hate the word "budget"), Langemeier looks for ways to make more money. One way she likes is to get on an online auction site and sell things of value. "One doctor, who had a great income, got in trouble and sold his gun collection," she says. "Another woman cooks for parties. A teacher picks up tutoring clients."

She is a big believer in saving, even a little at first. With interest rates so low, finding a good place to park money is hard these days. Both counselors liked some Internet banks to gain higher rates.

They also recommend getting the free annual credit report from each credit bureau, an opportunity that recently became law and is being implemented across the country in stages.

No Cheating Allowed

Any debt reduction or income increase plan takes both discipline and sacrifice, as Cavazos points out.

Langemeier emphasizes changing spending behavior. "Spendaholics keep repeating the cycle."

Cavazos might let you cheat a little but in a positive way. "The conventional wisdom is to pay the highest interest card first," he says, "but if it makes you feel better to eliminate at least one card, pay the smallest balance first."

Then you can say, "I used to have eight credit cards, now I only have seven."

Just like the 40-pound weight gain, you didn't get in debt in a month or even a year. But you might get out much faster than a couple of decades. Cavazos says his counselors don't let you come out of the process with bad credit, either.

"I had clients hug me and say, 'I feel like a 1,000-pound weight came off me,'" Cavazos says.

Star Lawrence is a medical journalist based in the Phoenix area.

Published Jan. 3, 2005.

SOURCES: Loral Langemeier, author, Guerilla Wealth; founder, Live Out Loud, San Francisco. Rudy Cavazos Jr., director of education and community relations, Money Management International, Houston.

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