Too Much Debt Here are some Warning Signs !!!
Warning Signs of Too Much Debt
How to Know if You Are In Over Your Head in debt? Do you know the warning signs of too much debt? Credit is great if used wisely, but more and more people are getting in over their heads and threatening their financial futures. Too much debt is not a good thing.
According to many financial experts they say that your debt load, excluding your home or rent payment, should not exceed 20% of your take-home pay. What you should do is add up your monthly debt (excluding your rent or mortgage payment) and divide this amount by your monthly take home (net) income, then multiply by 100. This number in percent will reflect your monthly debt load.
In this amount consumers should include second mortgages and home equity loans in the mix when they measure their debt load using this 20% rule. The reason is simple: While a first mortgage is an investment in property that, in most cases, is appreciating in value, second mortgages, in many cases, are simply the homeowner's attempt to pay off unsecured debt, like unsecured credit cards.
If you think you might be heading down the path of debt troubles, there is no magic solution, just good old common sense. One thing you can do is start making a budget to track your daily spending habits. Review the budget and try to cut back or alter your spending habits by at least 10%. Then you should put the 10% in a savings account and stop using credit cards and pay cash for your purchases.
Just because you are able to pay your minimum payments each month does not mean you do not have a problem with debt. Remember, low minimum payments benefit the credit card company, it does not benefit you. If you just pay minimums it will take you decades to pay off purchases whose prices have become inflated due to interest charges that have accumulated over the years. This is how credit card companies make their money.
Do not allow yourself to be lulled into a false sense of security that you have your debt under control just because you are not late on any payments and you can manage the monthly minimums. Below are just some of the warning signs that you have a credit/debt problem. If you answer “yes” to one or more of the first six questions and “no” to the rest, you may have caught the problem before it is unmanageable, as long as you act now to change your spending habits. If you answer “yes” to one or more of questions seven through 15, your problem is much more serious and will require more drastic steps. Take care of the problem is just one click away.
Warning signs of debt problems
1. You do not have any savings.
2. You make minimum payments on your credit cards.
3. You use credit cards for things you used to buy with cash, such as groceries.
4. You use increasing amounts of your total income to pay off debts.
5. You have more than two or three major credit cards.
6. After you pay your credit card bill, you increase your balance by the same amount (or more) the following month.
7. You are at or near your credit limit on your credit cards.
8. You count on the float in order to pay your bills, writing a check hoping that you'll be able to cover it by the time it clears your bank.
9. You are unsure of the total amount you owe on all your debts.
10. You take out cash advances on your credit card to pay other bills.
11. You have tried to make a purchase with your credit card and been declined.
12. You have been denied credit.
13. You bounce checks.
14. You get calls from collectors.
15. You lie to your spouse or other family member about your spending, hide credit card statements or constantly argue with family members about your finances.
If you are drowning in debt then the sooner you act, the easier it will be to get out yourself out of the debt troubles you may be in. Beware of companies that promise to fix your credit. There's no easy fix, but it is possible to turn your finances around if you work at it.
Below are some other warning signs that you might be in too much debt:
You cannot pay off the bill in full each month. Even before you get to the stage where you're only paying the minimum, there are warning signs. If you rarely see your credit card balance drop to zero, you need to start rethinking your spending/saving plan.
You are charging because you do not have the money. If you are making purchases with your credit card because you cannot afford to pay cash, that is a strong sign you are in financial trouble.
You are near or at the limit with your credit cards. You have spent yourself into a corner, and the credit you need to buy necessities for everyday life is used up.
You are suffering physically and/or emotionally. Your brain is recognizing that your spending patterns are in conflict with your income and your anxiety level increases.
You are running up unsecured lines of credit. Many institutions offer lines of credit or overdraft protection on checking or savings accounts. If you are utilizing these services on your accounts month to month, then you have a problem. Because these services usually have a cost associated with them, they can be expensive every time they are used. These services were initially meant to help with short-term liquidity issues, not relied upon every month.
You are living paycheck to paycheck. You do not know which bill to pay first.
If you or your spouse became unemployed, you'd be in financial hot water. This is another indication that you're living month to month, and a sign that you have no savings as a reserve. You need to build up that savings account.
All you can pay are the minimums. Whether you earn $25,000 or $250,000 a year, this is a sure sign of financial trouble.
You are using future money to pay current bills. Borrowing from next month's income to pay last month's bills is a good sign that you're in over your head.
You are always in a jam financially. If it seems like you are always in a financial crisis, then you're definitely above your debt comfort zone. Scale back and build some savings.
You are denied credit -- or asked to obtain a co-signer. If you have established credit and now creditors don't think you have enough money to repay them, chances are you don't.
If you feel you debt is out of control Kimberly Credit is here to help you. Just fill out one of our applications and one of our credit counseling experts will contact you shortly to discuss how we can assist you in taking control of your debt.
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