AICCCA Suggests 5 Things Consumers Need to Know About Their Money

Fairfax, VA - July 24, 2003 - Most people were not taught money management in school and many grew up when talking about money as a family was taboo. Unfortunately, those practices contributed to a generation of people who are self-taught money managers, many of which have failing grades.

Bankruptcies are at an all time high with 1.5 million filings in 2002 and the number of credit counseling agencies has more than doubled in the past decade. Approximately two million people will seek help to get out of debt in 2003.

"Learning the basics of managing money is time well spent for anyone," said Dave Jones, president, Association of Independent Consumer Credit Counseling Agencies. "Managing your money is not a no brainer, it takes knowledge and discipline."

AICCCA offers these five things consumers need to know about their money.

1. Know savings can cushion a crash. An emergency savings cushion is an essential money management tool that will help consumers avoid going into debt each time there is a large unexpected expense. As a general guideline consumers should strive to put aside three to six months of living expenses in a savings account that will be used only for financial emergencies. Car repairs, replacing an old appliance, medical expenses, a job loss or loss of work hours and a divorce are all unexpected events that can put a strain on finances and without a savings cushion may cause serious financial problems.

2. Know the 20 percent rule. Debt to income ratio is a number that every consumer should know and strive to keep below 20 percent. The only way to keep a handle on this is to know how much is owed. Consumers should add up all debts excluding mortgages and divide by total income. If the number is more than 20 percent, take a hard look at spending habits and whether or the bills are getting paid on time. A debt to income ratio higher than 20 percent could be a warning sign that consumers are carrying too much debt.

3. Know what credit costs. The true cost of credit is often a wake up call for many consumers. Anyone who shops the sales and then charges their purchases to a credit card that will not be paid off for many months has lost any savings they may have realized. As an example, a $400 purchase bought on sale for $350 is a saving of $50. However, if the purchase is charged to a credit card with an annual percentage rate of 14 percent interest and not paid off until one year later the $50 saved is spent in interest charges thus truly saving nothing. If the purchase is not paid off for more than two years the purchase will actually cost the consumer $455!

4. Know where you are going before you go. A spending plan is a tool that gives consumers control over where their money goes. Many people do not understand the value of a spending plan, but are frustrated when they reach the end of their money before the end of the month. A spending plan helps to prioritize expenses and purchases so that there is not more going out than there is coming in. Consumers who utilize a spending plan save more money, have less debt and far fewer financial problems.

5. Know when you owe. Organization is a financial must. Consumers need to know how much they owe and when payments are due. Late fees are an expensive and unnecessary expense that often result in higher interest rates as well. Keep track of bill payment due dates and make sure to pay on time. Late payments are the reason many consumers have negative marks on their credit reports. A little organization will prevent late fees, higher interest rates and lower scores on consumer credit reports.


Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call (800) 450-1794 or visit www.aiccca.org.