From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(November 30, 2005) — With the holiday season coming to a close, it’s time to get serious about managing your debt. If you are staring at a stack of outstanding credit card bills, the Virginia Society of CPAs suggests you follow this seven-step plan for managing debt:

1. Curb the urge to spend.

You’ll never get out of debt if you spend more than you make each month. Effective debt management begins with taking a critical look at your spending, and then setting priorities for change. Take the time to write down everything you spend for a month and you’ll be able to analyze where your money is going. Identify where you can cut back, and allocate the money you save to paying down debt. Plan to put money aside throughout the year, so you can avoid using your credit card during the next holiday season.

2. Know what you owe.

You can’t come up with a plan for managing your debt until you know where you stand. List all your debt, including the outstanding balance, minimum monthly payment, and interest rate. Start with the credit cards and loans with the highest interest rate and work your way down.

3. Prioritize your payment plan.

First, determine the maximum amount you can afford to pay each month. Then, set up a plan for paying off the debt with the highest interest rate first, while paying at least the minimum due on the others.

Use any and all available cash to pay down the debt. This includes raises, bonuses, and the $20 bill you found in an old coat pocket. When the highest interest debt is wiped out, use the cash that is freed up to step up efforts to pay down the next debt on the list.

4. Restructure your debt.

One strategy is to move your high-interest credit card balances to a card with a lower interest rate. Or, if you own your own home, consider transferring your credit card debt to a home equity loan or line of credit. The interest rate is likely to be significantly lower, and home equity interest generally is tax deductible. Just be sure that you don’t make this decision lightly. You run the risk of losing your home if you don’t meet payments.

5. Cut up extra credit cards.

As you eliminate your credit card debt, be sure to cancel the paid-off cards so you’re not tempted to run up a bill again. There is no need to have more than one or two credit cards.

If you don’t want to carry cash, use a debit card. With a debit card, the funds are pulled directly from your checking account. So before you use it, you need to determine whether you have the cash to make the purchase. This can help reduce the urge to overspend, particularly if you know that the money in your checking account will be needed for another purpose.

6. Don’t hide from the truth.

Get a copy of your credit report and study it carefully. Copy is two different colors The 2003 Fair and Accurate Credit Transactions Act gives every American the right to a credit report every year from each of the three major credit bureaus — Equifax, Experian and TransUnion. To order yours, go to This is the only authorized source for accessing your annual credit report online for free. If you prefer to order your free report by phone, call (877) 322-8228. Study your report carefully and follow the agency’s instructions for making any corrections.

7. Seek professional advice.

If you don’t feel you can go it alone, look for help from a professional credit counseling company. Consumer Credit Counseling Services (CCCS) is a national non-profit company that can help you explore your options for getting out of debt. You might also consult with a CPA [and a CERTIFIED FINANCIAL PLANNER™ professional] who can help you work debt repayment into an overall financial plan for the future.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


Lifetime Financial Planning, Inc.

Dean Knepper, CPA, CERTIFIED FINANCIAL PLANNER™ professional

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208 South King Street, Suite 201, Leesburg, Virginia, 20175

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