The post originally appeared in partnership with Bham Now.
As director of Financial Stability Services at United Way of Central Alabama (UWCA), Doug Horst knows a thing or two about helping people handle and get out of debt. That’s why he wanted to share information about his program’s latest workshop about managing debt titled “Your Journey to Financial Wellness.”
“Handling debt or avoiding debt is a vital part of overall money management,” said Horst. “Through United Way Financial Stability Programs, we are helping people take the next step forward in their lives to become more stable financially. Debt—particularly credit card and personal loan kinds of debt, including vehicles—is one of the biggest detractors for people’s ability to move forward with their personal financial lives.”
The United Way holds two financial wellness workshops a month throughout the year. The workshop in February 2022 was conducted by Eula Jackson, Community Development Manager at Trustmark Bank. It focused on budgeting and debt issues, including what to do to avoid debt and handle debt if you already have it.
To help you get an idea of how valuable these workshops are, Jackson shared useful tips people can use to manage debt.
Three Tips On Handling and Avoiding Debt
Know your Starting Point:
Where to begin? Obviously, you need to know where you are when it comes to debt and financial health. How “fit” are you?
Know your Debt-to-Income (DTI) Ratio: To calculate your ratio, add up all your monthly debt payments and divide that number by your gross monthly income (income before taxes) to determine your financial health.
Financial Athlete Less than 30% DTI
Fit 31-36% DTI
Borderline 37-40% DTI
Unhealthy More than 40% DTI
Know your Credit Score: Anything 700 and above is a good credit score. Factors that affect your credit score include your payment history, your available credit, your credit history, your new credit, and types of credit.
Make a Plan
The best way to manage and/or get out of debt is to “plan, plan, plan!” Jackson provided this simple budgeting tip:
Create a budget: Many financial experts recommend that people create a budget following the 50/30/20 rule:
50% of your income should go to your needs like housing and food.
30% goes to wants like eating out and hobbies because you still need balance.
20% should go toward savings and additional payments beyond the minimum payments on your credit cards.
Work with United Way
From housing counseling to support on doing your taxes, United Way has a number of services to help people manage their debt. For example, UWCA HUD-approved housing counselors provide the following services:
Pre-purchase/home buying
Foreclosure prevention
Non-delinquency post-purchase housing counseling
Rental counseling
Homeless prevention support
Financial capability
Reverse mortgage counseling
Visit UWCA’s Financial and Housing Education website for details, or call United Way’s 2-1-1 and they will help direct you to various services, including Free Tax Preparation and Family Stability Services.
Upcoming United Way Workshops
Along with these tips, United Way offers financial stability workshops twice a month.
Bookmark the United Way Events Calendar so you can see when new workshops are added monthly.
Here is the current lineup:
March 8 – Renting vs Owning – weighing pros and cons of renting vs owning and providing information to assist people in making this important financial decision.
March 22 – Financial Stressbusters – providing valuable insights on managing money in times of significant stress.
April 10 – Are you Ready to buy your Home?
April 26 – Disaster Preparation (by the way, this is one day away from the anniversary of the BIG 4/27 tornado several years ago)