NEW CASTLE — When it comes to managing personal finances, knowledge can be as good as gold.

But like quicksand, raging debt can pull you down and bury you beneath an avalanche of bills.

As bankruptcy filings continue to soar, local experts say the right information and common sense can keep you out of debt or help you survive a financial crisis.

Lori Zulauf is an assistant professor at Slippery Rock State University, where she teaches a personal finances course. She says planning and exercising financial discipline are vital. “It’s so practical,” said Zulauf, a graduate of Laurel High School. “The course focuses on relationships between you and your money, credit cards and banks.”

Budgeting, credit, savings and knowing how to read check stubs are among issues covered. Students do their own balance sheets and income statements. They also research their credit scores.

Zulauf said the course is an elective that fills to capacity every time it is offered. There were 49 students enrolled in the recent semester.

“It’s beneficial for students to examine their own financial situations,” said Zulauf. She noted that the average college student at a state school has $25,000 debt upon graduation.

Nancy Richards, who teaches consumer economics to juniors and seniors at New Castle High School, said a recent survey indicates there more 18-24-year-olds file for bankruptcy than graduate with college degrees.

David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, headquartered in Fairfax, Va., says he’s not surprised by an increase in filings.

“We see more and more people seeking help, and fewer we can actually help” in credit counseling because they are too deeply in debt. In most cases, people waited too long to turn to credit counselors for help.

Robert Lawless, a bankruptcy expert and professor of law at the University of Illinois in Urbana-Champaign, says filings typically rise in February and March as people use tax refunds to cover bankruptcy filing fees, which can run $1,000 or more.



PROVEN WAYS

Both Zulauf and Richards say it doesn’t have to be that way.

“Things that worked 20 years ago still work today,” says Richards. “But if your family doesn’t teach you how to handle money, you’re probably not going to know.”

Zulauf said many students feel overwhelmed by debt. “They contemplate filing bankruptcy over $1,800 of credit because they have no income.” But Zulauf advises against it. “You don’t want to screw up your credit rating for $1800,” she said. “Bankruptcy will stay on your record for 10 years.”

One size doesn’t fit all, but Zulauf said there are proven ways to eliminate debt.

“If you have a lot of debt, consolidate it onto one credit card,” she said. But if large amounts are owed on multiple cards, she advises “to attack the card with the highest interest rate.”

Zulauf has other suggestions, like paying off the smallest balance first, and then going to the next smallest; calling your credit card company to request a lower interest rate; and making payments on time to avoid penalties.

She said college students are bombarded by credit card companies and most have no experience or knowledge of how to use them.  “There is wise use of credit and foolish use of credit,” Zulauf said. “Credit cards are can be invaluable if used sparingly.” Keeping a low balance, paying off purchases at the end of every month when possible are other rules to follow, according to Zulauf.

“If you borrow on an 18 percent credit card and just pay the minimum balance each time, it could take 20 years to pay off something like a refrigerator,” she said.

But before paying down, Zulauf recommends putting an emergency fund in place. “People will have problems no matter what their incomes,” she said. “There’s nothing more frustrating than starting to get out of debt and then having an emergency to deal with and nothing set aside for it.”



EARLY PLANNING

“It’s very important to plan for retirement, beginning at a young age,” Zulauf said. “People get caught up in credit woes and forget about retirement. You should plan for retirement even before you plan for your children’s education.”

“If your employer is matching the money put into a 401k, make sure to take advantage of that. That’s free money.” She advises despoiting the maximum amount into such a plan. “But even if its 1 percent to start with, just try to increase it every year.”

Richards also prioritizes saving a portion of your money before baying bills. She calls it, “Pay Yourself First” or “PYF.” A former student recently told her that he continues to employ the “PYF” principle and it works.

Richards teaches students to monitor their bank accounts and advises them to put 20 percent down on major purchases whenever possible.

Improving your credit or maintaining a good credit report are important to one’s financial health.

 FICO is a score that makes up a substantial portion of the credit report that lenders use to assess an applicant’s credit risk and whether to extend a loan.

The FICO score takes into account various factors in each of five areas to determine credit risk: payment history, current level of debt, types of credit used and length of credit history, and new credit. A person’s FICO score will range between 300 and 850. In general, a score above 650 indicates a very good credit history. Those with scores below 620 will often find it more difficult to obtain financing at a favorable rate.

“What’s best way to build up your credit,” Richards asks. “Always pay your bills on time.

“You don’t have to be wealthy to manage your money,” she said. “It’s best to make the most out of what you have and learn to live within your paycheck.”

(Reporter David Burcham has much more on how to do battle with credit and finance issues in the Weekend edition of The News.)