10 missteps that will plunge you into debt

It is that time again when we look at the old year and say that we will do more, better, smarter things next year; that the sins of the past will forever be buried and having learned many painful lessons, we shall become new men and women.

Ha! Fat chance.

In a life that seems to get more complicated rather than less; harder rather than easier and more competitive as we get less so, I want to offer some basic and simple tips that might help you exit 2006 with a bit more in your pockets than when you entered.

So with a tip of my hat to Florenz Ziegfeld, here are my follies for 2006.

Folly No. 1: Paying the minimum only. The government has already told you that smoking is bad, well this year it said minimum payments on credit cards are bad, too. New regulations will increase your minimum payments. This is to force people to pay off their debt in a 'reasonable' period of time. Even with the new guidelines, paying only the minimum can take up to 10 years to pay off.

Folly No. 2: Using credit to extend your income. One of the reasons that clichés are used so often is that they are actually true. When your mother told you to "live within your means," she gave you sound financial advice. If you are using credit for basic living expenses like groceries, look down; you may have one foot on a banana peel.

Folly No. 3: Charging with no plan to pay off the balance. Did you know that the caveat "stop it or you'll go blind" referred to using credit without a plan to pay the debt back? To practice safe credit, have a plan to pay your balances in full within 90 days.

Folly No. 4: Believing defaulting on unsecured debt isn't that big a deal. Unsecured debt is not secured by your car or home, but the creditor does have ways to legally collect the debt. You can be taken to court and have your wages attached. It can be harder to get a job, promotion or insurance. And at a minimum you will be hounded day and night until you pay or drop dead. One collector told me that there is some evidence that St. Peter buys dearly departed defaults and adds the balance on to your admission fee at the pearly gates.

Folly No. 5: Paying late and getting hit with high fees. The average late fee is now around $32, and many card issuers charge $39 for late payments. They also have a special default rate of 30-percent plus. The two together can make your minimum payment huge. If you are paying late because you are unorganized, get organized. If you pay late because you can't afford the payment, get help.