How Do You Know When You Have a Debt Problem
Many people have debt. Today, borrowing money is basically necessary for many people to buy a car, go to college or university, or purchase a house. Credit cards are frequently used as payment and lines of credit are quite common as well. However, there is a difference between having some debt and having too much debt. Most people have some debt and, as long as your debt is manageable, there’s generally no issue. However, if you have too much debt, you could be putting yourself in serious financial trouble.
But how do you know that you could have a possible debt problem? Here are some of the warning signs.
- You can only make the minimum payments on your credit cards
- Making the minimum payment is incredibly costly. If you only pay the minimum required, not only will it take you an incredibly long time to repay your debt, but you will also end up spending a lot more money to do so. If all you’re able to do is pay the minimum, this is a very strong sign that you have borrowed more than you should have.
- You pay one debt with another
- If you’ve used one credit to pay off another or a line of credit to pay a bill, for example, there’s a very good chance that you have more debt than you can handle. Counting on new loans to cover your existing loans isn’t a viable strategy and eventually you’ll run out of options.
- You’ve taken out cash advances or payday loans
- These are very expensive ways to borrow money and, if you have used these methods to pay your bills, this is a sign that you have too much debt.
- You cannot build any savings
- If you find yourself unable to save any money each month, then you likely have too much debt.
- You don’t know how much you owe
- When you have a lot of debt, it’s common to not know exactly how much you owe. Some people simply lose track of their debts since they have so many different bills coming in. Other people start ignoring bills and statements because they feel overwhelmed by them. If either of these situations sound like you, you likely have too much debt.
- You’ve missed payments
- Whether you’ve missed payments because you’ve lost track of what you have to repay, or if you’ve done so because you don’t have the money available, the cause is likely the same: you have too much debt.
- Creditors or collection agents are calling
- Calls from creditors and collection agencies can be incredibly stressful. If you’re facing these calls, you have more debt than you can handle.
- You hide your debt or your spending
- If you try not to tell your spouse or your partner about your debt or your spending, it’s likely because you know you have an issue.
- Your credit cards are maxed out or near the limit
- If you worry about your card being accepted when you make a purchase, or if you have to go through several cards to find one that will go through, you likely have a debt issue.
Of course, you don’t need to have all of these signs. If you have two or more possible warning signs, you could be heading towards a different debt issue (or you could already be suffering). Even if you only have one sign, there could still be an issue.
If you are having trouble handling your debt, sit down and look at your budget. Determine where you can make cuts so that you can put more of your money towards debt repayment. You may need to make some sacrifices to fit everything under budget, but it will be worth it in the long run.
When you’re reviewing your budget, be sure to include a section for emergency savings. It may seem odd (and quite difficult) to be putting money aside when you’re struggling with debt, but having savings is critical. Without savings, any unexpected expense can put you into significant money trouble and make your debt problems even worse.
If you’ve gone through your finances and you’re not able to afford all of your expenses and debts in your current financial situation, then it could be a good idea to speak with a licensed financial professional.