Tips on How to Get Out of Debt

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NBC Today Show
Katie Couric/Ray Martin
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Video News Report
NBCUniversal Media, LLC.
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The pre-holiday season is an excellent time for families to evaluate the state of their finances and their degree of debt. Financial advisor Ray Martin gives practical advice for assessing how much trouble your finances are in, and how to get out of debt.



"Tips on How to Get Out of Debt." Ray Martin, correspondent. NBC Today Show. NBCUniversal Media. 30 Aug. 1996. NBC Learn. Web. 4 November 2017.


Martin, R. (Reporter), & Couric, K. (Anchor). (1996, August 30). Tips on How to Get Out of Debt. [Television series episode]. NBC Today Show. Retrieved from


"Tips on How to Get Out of Debt" NBC Today Show, New York, NY: NBC Universal, 08/30/1996. Accessed Sat Nov 4 2017 from NBC Learn:


Tips on How to Get Out of Debt

KATIE COURIC, co-host:

Unfortunately, or fortunately, now is the time to think about paying those bills. Here to tell you how to clean up your act is TODAY's financial adviser Ray Martin.

Hi, Ray. Good morning.

Mr. RAY MARTIN: Hi, Katie. Good morning.

COURIC: Why is fall a good time to start to evaluate your financial situation...

Mr. MARTIN: (Unintelligible).

COURIC: ...your debt situation particularly?

Mr. MARTIN: I think you just said it. People have gotten their holiday bills paid off from last holiday season. They've charged a little bit this summer for back-to-school expenses. But now is a time to really focus on this before you really get into that heavy spending in October or November for next holiday season. You've got a little bit of room here. Take advantage of it.

COURIC: Now you have outlined three different degrees of debt, if you will.

Mr. MARTIN: Yeah.

COURIC: The first one is up to your keister--or up--up to your waist, for our purposes...

Mr. MARTIN: Right.

COURIC: do you know you're--you're at that point?

Mr. MARTIN: Well, at that point, first you're spending about a third to a half of your income in payments on your debt. You've got to be careful here, because you're finding out that you don't have any money left over to save, or you're not contributing the maximum amount to your 401K, for example, that you can.

COURIC: Uh-huh.

Mr. MARTIN: If those symptoms sound like you, that--this might be your situation. Now you might have a checking account, a savings account, or some mutual funds that you could use to pay off this debt. And you feel like `Well, I don't want to take my savings or my investments, but do it. You're not going to earn the 18 or 19 percent after tax expense that credit cards will charge you. So take those mutual funds, pay off the credit card debt. And our tip on this one is, once you have--once you do that, take the savings and rebuild your investment over time.

COURIC: OK, the next principle, up to your neck.

Mr. MARTIN: Yes.

COURIC: That's a little more worrisome, needless to say.

Mr. MARTIN: It sure is.

COURIC: How do you know you're at that level?

Mr. MARTIN: Well, when you're finding out that you're paying half or all of your income to paying off revolving debt, auto loans, credit cards, other types of expenses that you have, you're in trouble here. You're not putting anything away for the future. You may not even be contributing to a company savings plan that has a valuable matching contribution, for example.

COURIC: Mm-hmm.

Mr. MARTIN: You don't have any savings; you don't have any investments set aside either, you're in trouble here, serious trouble. But there is hope.

COURIC: All right.

Mr. MARTIN: You can get out of this.

COURIC: What would you advise?

Mr. MARTIN: Well, one example, one thing to do here would be to consolidate all of your credit cards. Get one credit card with the lowest interest rate. Because you're carrying a balance, you're what we call a revolver. So get the low interest rate card, consolidate all your cards onto that, and use the additional savings that you'll have--you're going to save 50 to 70 percent in interest charges on these low rate offers--use that savings to pay off your principal aggressively and invest in your debt.

COURIC: Why not just get rid of all your credit cards if you are in such hot water?

Mr. MARTIN: Now, I suggest that. The average number of credit cards per family might be 12 cards per family. You only need...

COURIC: Just unbelievable, isn't it?

Mr. MARTIN: It is unbelievable. It's--it's--it's--and the average balance per family is about $4,000.

COURIC: Is there any advantage to having a lot of credit cards?

Mr. MARTIN: I don't think so, especially those--those retail store cards. The--the--the interest charges are extraordinary, and they make shopping just too easy, because you have a chance to spend irresponsibly.

COURIC: Honey, I hear you, because you just say, `Plastic.'

Mr. MARTIN: But do it.

COURIC: Well, tell us about--a little bit more about these low-rate credit cards.


COURIC: We've been hearing a lot about those...

Mr. MARTIN: Yeah.

COURIC: recent months.

Mr. MARTIN: Well, these are offers that banks--major banks are offering to--to pull in more customers. They offer 6 percent for six months if you transfer your balances with us. It's a great tool for people to use who are carrying balances right now to get their debt paid off. But be careful, I don't think these offers are going to be available in the next year or so, because banks are getting in trouble with them. So take advantage of them now while they're still there.

COURIC: But if you have to have one credit card, get one of these low-rate credit cards.

Mr. MARTIN: Get one of these low rates, especially if you are paying a balance. Take the additional savings and pay off your principal here. Get a copy of your credit report, for example, to see all of the other cards that you have. Close them out. And if you're really in trouble here and you need a debt workout plan, you can call the National Foundation for Consumer Credit, and they'll give you a plan for the principal payments to pay off your debt over time here.

COURIC: OK, real quickly, tell us what you do when you're over your head.

Mr. MARTIN: You're over your head here. Your debt--your debt is a multiple of your income, one time or five times your income, you're really in trouble. And you might ask, `Is it hopeless?' And I say it's probably hopeless to get paid off. And be careful, because a consumer credit counseling organization may tell you, `Let's do a debt workout plan.' But remember, they're paid as a percentage of the debt they help collect and pay back for you. So I think there's a conflict there.

COURIC: Ah, so be careful there.

Mr. MARTIN: Yeah, be careful there. You might suggest--look at personal bankruptcy. I know it's a tough--tough thing to swallow, but you need a fresh start. You need to get out from under this, start a clean slate and get going. And I think that's more important. You can put other financial goals such as saving for your future back on target if you do this.

COURIC: All right, Ray. Ray, thanks a lot. Good advice.