Americans seem to rack up crazy amounts of debt – and some don’t even think twice about it! New vehicle? Vacation? Furniture? Put it all on the card! I’ll get to it later. But there is a line of what is too much debt for you to handle. Is your debt out of control? Here are 6 signs and how you can save yourself.
Your debt is increasing
If your balances are growing every month, then your debt is probably out of control. Charging more than you are paying off is not going to help you get out of debt. Yes, it’s wonderful to make a large payment on your credit cards or loans, if you then turn around and charge even more than what you just paid off, you are not helping yourself.
As a side note, when your debt is increasing, your credit score is decreasing. One of the five factors of your credit score is what’s called your credit utilization ratio. This is a fancy way of saying how much credit are you using in relation to what is extended to you.
Going from one balance transfer card to another… to another
If you are opening a new credit card every year in order to take advantage of the 0% introductory offer, you may have a debt problem. Doing it once may be fine and may work for you. However, if you are doing this year after year and never fully paying off your balance, that is an issue. Not only does that mean you have taken on too much debt, but it can also hurt your credit score.
Also, if you are borrowing money or taking out loans to cover your necessary expenses, that should be a red flag. Putting groceries on a credit card in order to get the rewards is one thing (and you pay if off every month), but putting those groceries on your card because you can’t afford to pay for them outright is another thing. You must be able to cover the cost of your necessities (bills, groceries, insurance, etc).
You’re getting calls from debt collectors
If you are getting calls from debt collectors, you obviously have some unpaid debts in your name. Falling behind on payments because you cannot keep up is a sign your debt is out of control.
Again, I’m going to say this impacts your credit score (so many things do!). Having accounts in collections can have a dramatic effect on your score.
Maxing out your credit cards
If your credit cards are maxed out (or above the limit), your debt is out of control. Not only does this add stress in your life, it also hurts your credit score (yes, we’re back to that). Pay more than the minimum (see next sign), reduce your stress, increase your score, and get that debt under control. Another effect of maxing out your credit cards is you may not be approved for any new cards or loans. If you’re getting denied for cards or loans, that’s another sign.
Making only minimum payments (by the skin of your teeth!)
You are scraping together money to only make the minimum payments. This means you don’t have enough to contribute more than the minimum. I don’t need to say how much interest you’ll be paying or how long you’ll be paying if you only make the minimum payments. On every statement, you will see it written out for you. Paying more than the minimum means your debt will be paid off quicker and you will save money in interest. Win-win!
You’re not saving money
Are you putting more money (or all of your money) toward your debts and not toward your savings? If so, your debt could be out of control.
What To Do If Your Debt Is Out Of Control
If your debt is out of control, the first thing to do is stop digging your deeper hole. You want to get out of that hole! Stop spending your money on all the little things that don’t matter. Do you remember all of your purchases in the last month? Probably not. Spend consciously. Be aware of everything you are buying. Is this purchase going to help you achieve your goals? If not, don’t buy it.
Create a plan. If you need a financial counselor, make an appointment with one. We at Ford Financial Management offer a free consultation to see if we are a good fit to work together. Get your support system in place. Friends and family who will keep you on track and hold you accountable (in a supportive, encouraging way).
Start allocating every spare dollar you have toward your debt. If you need an app to help you, there are some great ones out there. Do you like Excel? Create a spreadsheet to keep track. Find a way that works for you and will keep you motivated. Your goal is to be debt free – whatever that means to you. To some it’s to be debt free except a mortgage. To others it is to be completely debt free – including their mortgage.
Final Thoughts
The good news is that no matter how large your debt is, you can overcome it! Yes, it may take a while. Yes, it will be difficult. But you CAN do it! Don’t lose more sleep over financial stress and anxiety!
Do you need help taking back control over your money instead of having your money control you? Reach out to us and schedule your free consultation today!
