It is wise to pay attention to the warning signs of too much debt. While America’s debt reaches a new high, many still dismiss signs they are in a full-blown debt emergency. Owing money has become a normal way of life whether by car loans, home mortgages, student loans or credit card debt. With growing costs for food, medical services, and other life necessities on top of borrowed-money obligations, you feel the financial pressure. Overextending yourself should not be taken lightly and you may be misguided to think that this is a standard way to live. While it is financially- sound to borrow money and expected to encounter small financial struggles occasionally, your ultimate goal, avoid overspending, and to reduce your overall debt.
Here are the 10 warning signs of too much debt you should pay attention to:
1. You don’t know how much you owe.
You may not realize how quickly debt builds up. Not knowing what you owe is a telltale sign you might be over your head. To remedy this, begin to document your financials. Grab your bills and tally up the totals to determine how much you owe each month. Remember to consider the accumulating interest to be able to prioritize debt payments. Compare your bills to your monthly income. Take the time now to set a monthly budget and learn from your spending habits to modify your behavior. Don’t despair if you don’t like what you see. You are taking a crucial step to improve your situation.
2. All your money goes toward debt.
If you are spending 50% or more of your income each month to directly pay back loans and credit cards, it’s time to make a change. You may need to refinance loans, earn additional income through a part-time job or make creative changes to reduce expenses in order to make ends meet. When you are able, balance transfers to low-interest credit cards may help you. The benefit of reducing your monthly spend on debt comparatively to your income is large. It will free up money allowing you to save money and reduce debt.
3. You Can Only Afford Minimum Payments.
If you find you are only able to make the minimum payments, you overextended yourself. While it is tempting to pay only what is required, it will take years and thousands of dollars in interest to pay your debt off. Take your credit cards out of your wallet. Cancel any automatic payments to your cards. Consider asking lenders to lower interest rates. Earn extra money to pay additional funds to your balance.
4. You Suffer Physical Or Emotional Side Effects.
Are you so worried about paying your bills that you can’t sleep at night? Do you hide your debt situation from your partner? Do you argue over money?
5. You Don’t Have Any Money Saved.
If your savings account reads $0.00 or if you’ve stopped depositing, you need to consider the reason behind it. If too much debt has burdened your savings account, it is time to take action. It is common financial advice that you have at least one month of income in your savings. This is to cover any emergency that comes up. This emergency fund should be established prior to attacking your debt. This will stop the downward cycle that debt creates and will provide you great peace of mind.
6. You Have Been Denied For New Credit.
If you’ve been denied a new loan or credit increase, take another look at your finances. Lenders may feel that you are overextended and not willing to take a chance.
7. You Pay Your Bills Late Or You Juggle Just To Make Payments. You Pay Bills With Money Borrowed.
If you are transferring balances of one credit card to pay another, or refinancing your home or withdrawing from your retirement funds, it’s time for a change. While these solutions offer relief, you will need to address the problem and change your behavior for long-term success.
8. You Avoid Looking At The Mail Or Answering The Phone.
If creditors or collection agencies are trying to reach you, this is an obvious sign of trouble.
9. You Can’t Afford Living Expenses Without A Credit Card Or Loan.
10. Your Credit Cards Are Maxed Out.
While there may be more signs of large debt, we hope our list has inspired you to pay more attention to your finances and instill a goal of debt-reduction. Reset your distorted perspective that debt is part of life. Pay attention to the warning signs so that too much debt doesn’t creep up on you. Take control today. Step by step, you can lessen your debt obligations. Understand your debt and make a plan to change your spending and debt habits.