BUSINESS

Climbing out of debt: How to recover from overspending

Whether you plan to cut your bills through counseling, a consolidation loan, bankruptcy or pinching pennies, it's key that you have a plan.

By Katherine Vogt, AMNews staff. Feb. 16, 2004.

After years of scrimping while living on school loans, some physicians emerge from medical school and go hog-wild on a spending binge with their first paychecks.

"They've been in deprivation mode for so long because they've been in school for so long. Then they get out of school and it's easy to get into an overspending mode," said Barbara O'Neill, a professor of family and consumer sciences at Rutgers University.

This spending bender can produce a debt hangover.

Symptoms include worn-out credit cards, final notices from creditors and a seemingly insurmountable pile of IOUs. Extreme cases can develop into full-blown bankruptcy.

But experts say there are ways to recover from having too much debt. For some, using a debt counseling agency is the best way to appease creditors and develop a repayment plan. Others may choose to get a loan and consolidate their debts into one regular payment. Still others may simply turn to family members for help or rely on creating their own budget and repayment schedule.

Fueled by a weakened economy, consumer debt in America has reached an all-time high. The Federal Reserve estimates that consumer debt totaled $2 trillion in November 2003, up from $1.4 trillion five years earlier. Faced with lower reimbursements and often loaded down with school debts, physicians have been part of this trend.

While some debt can be good -- like when it is used efficiently to pay down other debts -- having just a little too much can cause financial ruin.

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