Mellody Hobson Answers Your Money Questions

One of the basic premises of long-term investing is your money compounds over time. Basically, interest is like stacking blocks, with each new interest period growing on top of the previous one, allowing your original investment to continually increase. In fact, if you invest your $200 in a diversified mutual fund for 25 years, you could expect to earn an 8 percent annual return, sending your $200 a month to almost $192,000.

Question:

I am curious regarding your recommendation for a debt management consulting service. Specifically, I am looking for help in the areas of lowering my credit card interest rates, creating a budget, and becoming debt free.
From: Gwen, Carmel, Calif.

Mellody's Advice:

I get this question all the time. I am wary of credit consolidators that advertise their nonprofit status and make unrealistic claims that they can erase your debt easily. Several advertised "nonprofit" agencies charge a fee themselves that is equivalent to one month's worth of payments -- a bad proposition, given the fact the consumer is likely underwater and in need of paying off their debt ASAP.

To date, government oversight of this industry has been limited at best. In fact, often times, these organizations are not even licensed with their state Banking Department, even though state law may require it. However, there is one credit consolidation organization that I think does a terrific job -- the National Foundation for Credit Counseling. The NFCC has 1,300 offices nationwide that help consumers with debt management plans. I recommend that you go log on to the NFCC's Web site to find a counselor that is near your home in Carmel.

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