Michigan residents continue to face some economic realities other parts of the nation are escaping – including debt issues. While much of the state is recovering nicely from the recent recession, the economy in other areas has remained somewhat stagnant. If you’re currently living in Michigan and are experiencing issues repaying debts, you’re not alone.
Why Michigan residents are experiencing credit card debt issues
One of the major problems that have complicated credit card debt repayment in Michigan is the lingering effects of unemployment during the recession. In mid-2009, Michigan’s unemployment rate peaked at over 14 percent, which was worse than just about anywhere else in the country. While the current unemployment rate has fallen to under five percent, the damage was already done for many Michigan residents. Debts incurred during the recession have proven difficult to repay even though more people are now working.
Those high unemployment rates during the recession impacted the ability of residents to stay abreast of financial obligations, and many people relied on credit cards just to survive. That means even though many people found some type of employment, their credit card balances were already inflated. Like everyone else, it has become one of the persistent debt issues that consumers have.
How does Michigan’s economic status compare to other states?
To really grasp the financial issues facing Michigan residents, it’s necessary to look at how the state compares to the rest of the nation. It also explains why some Michigan residents are experiencing financial difficulties.
- Per Capita Income. The median household income in Michigan is $52,492 in 2016. That’s significantly under the national figure of slightly over $59,000. Per capita income in Michigan is also lower than the national figures. That means Michigan families have a more difficult time paying for necessities than residents of many other states.
- Housing Costs. Michigan’s housing costs differ significantly across the state. Average home costs in Luce County, for example, come in at roughly $72,000 while those in Leelanau County are over $365,000. That type of disparity suggests the potential for cost extremes in other areas as well.
- Food Costs. While the cost of an average grocery basket is slightly below the national average in some communities, other areas face higher pricing. The cost of groceries in Ann Arbor, for example, is quite a bit lower than Grand Rapids residents pay. These types of disparities fuel the credit card problems many Michigan residents face every day.
- Healthcare Expenses. Michigan, like other states, continues to see rapid increases in all areas of healthcare. Families facing medical emergencies commonly use credit cards to cover immediate expenses only to find the increased balances are difficult, if not impossible, to repay.
The increasing costs Michigan residents face make repaying old debts even more difficult. Far too many people are still saddled with debts they first incurred during the recession years. Financial statistics indicate Michigan residents carry less credit card debt than residents of many other states, the state’s residents still average over $36,000 per capita.
If their debts are lower than other states, why are Michigan residents facing repayment problems?
The reasons people incur debts vary dramatically, but financial problems can, and do, create problems for people at all income levels. Although some people simply spend more than they can afford to, others face periods of unemployment (or underemployment), significant medical bills, or even divorces that cripple them financially.
Any of those, and many other, situations cause Michigan residents to get into debt they can’t realistically repay. Once the debts get to a certain level, it becomes difficult to pay even the minimum payments. That means the account balances go up, making it if more unlikely the credit card holder will be able to repay the balance.
What happens when credit card balances are maxed out?
If the cycle continues, cardholders will soon reach a point where their credit card balances reach their maximums and no additional credit is available. At that point, things tend to go from bad to worse, as those monthly payments are still due even though the cardholder can no longer use credit to cover day-to-day expenses.
If cardholders cannot make even the minimum credit card payments due, the credit card issuers will start calling and asking for immediate payments. This is a critical time. How the debt is handled will impact the card holder’s credit rating for many years to come.
Exploring new strategies to confront debt
There are several avenues to look at when repaying credit card debt becomes a critical issue. In most cases, the first thing anyone experiencing financial difficulties must do is consider a budget designed to control expenses and funnel more money into repaying credit card and other unsecured debts.
Although it’s a little late to start a budget once bills get out of hand, it’s an absolute requirement for reducing credit card debts. There are multiple ways just about anyone can reduce their expenses and use those savings to repay creditors.
Cut the cord
Most people today subscribe to cable or satellite television services. It’s easy for the monthly bills to reach $150 per month or more. While it’s nice to sit down at the end of a day and watch a movie on a premium cable channel, it’s an expense that might have to go. Look at ways to get by with a lesser package or, better yet, cut the cable entirely and stick to free channels until the budget is under control.
Most experts suggest consumers skip most of the middle aisles in the supermarket as they’re filled with over processed, unhealthy, and expensive foods. Although it takes a little more time to prepare meals from scratch, it’s far less expensive than purchasing prepared products.
Avoid eating out
Consumer advocates frequently point out the fact most people eat out at least four of five times per week. Over the course of a year, that’s a lot of money spent that could be used to repay debts. Look for ways to avoid restaurant meals unless there is some sort of special occasion. Eat more meals at home and consider carrying a lunch to work to minimize expenses.
Reduce entertainment expenses
If you enjoy going to movies, those costs are going up quickly. Even in a cheap theater, the cost of two tickets, popcorn, and candy will easily hit somewhere between $20 and $30. The costs of going to a concert are even higher. The national average for a music concert ticket is now over $45 and still going up. Finding ways to eliminate these expenses should be a priority until the credit card debt is eliminated.
Reduce your utility expenses
Even though the average electric bill for a Michigan home is lower than the national average, it’s still $94.52 per month. Heating bills can easily decimate a budget during winter months. That means it’s important to identify ways to reduce those bills whenever possible. Turn down the thermostat, especially if no one is going to be home for a few hours. Make sure all lights, computers, and entertainment systems are fully powered down when not in use. Even a few dollars saved every month will add up.
Every Michigan resident’s lifestyle is somewhat different. It pays to look at the ways you spend money to identify other areas where savings are possible. If you commute, for example, look for ways to share rides or, where possible, use public transportation. Every savings helps and can mean those credit card debts are repaid sooner.
Consider credit counseling
If you’re having trouble cutting enough corners, it might pay to locate a credit counselor to generate other ideas for creating and sticking to a budget. In many cases, taking advantage of their services is free for consumers, so look into the options in your area.
Exploring other options
If budgeting isn’t reducing the credit card debts and creditors are demanding repayment, it’s time to look at a couple of other options for repaying debts. Two strategies are commonly used by Michigan residents to get credit card debt under control.
Debt consolidation loans work for many people
In many cases, debt consolidation loans can eliminate all those individual payments for credit cards and other unsecured debts. A lender will provide the funds to repay current debts. That leaves the borrower repaying only one payment every month, and that payment is generally a lot less than the total of the credit card debts. The interest rates are also lower, which means you’ll save money every month.
Consolidation loans don’t work for everyone, however. Most lenders require a minimum credit score and a relatively solid repayment history. If you’ve missed too many payments, it may be difficult to obtain a consolidation loan.
Consider debt settlement options
Another option is to work with a debt settlement company. The company contacts individual creditors and negotiates more favorable terms for borrowers. Balance amounts can be negotiated to minimize the repayment amounts. The disadvantage is that creditors don’t have to cooperate, which means the solutions may not always be ideal.
The other disadvantage is that settlement options tend to impact credit scores more than some other options. However, if you’re in need of debt relief, debt settlement options are certainly worth considering.
Don’t put off addressing credit problems
The most important thing to remember is that ignoring a problem simply doesn’t work. Proactively working to reduce or eliminate credit card debt now, rather than later, is important for your future financial stability. Contact a debt relief professional today to get started on the road to financial security.
If you really want to get out of debt, you might want to consider using a budget plan. It can benefit you greatly – even more than what it can do for your finances.