Debt has practically become a national pastime. The United States and its citizens largely run on credit. While credit can be a great convenience, it can also create major financial challenges. Carrying too much debt creates a lot of additional costs and stress that are unnecessary. Anyone who’s had a sleepless night because of debt knows how much it can negatively influence your life.
Most of us are used to having a significant amount of debt. But, how much is too much?
Look for these 16 warning signs of debt problems which might indicate that you are carrying too much debt:
1. Carrying A Credit Card Balance
If you’re carrying a credit card balance each month, it’s critical to your financial health to pay this debt down. If you’re unable to pay it off, that’s a sign that you have too much debt.
2. You’re Taking Out a Loan To Pay Your Expenses
If you have to pay your expenses using loans from family, friends, credit cards, or payday loans, it’s an indication that your debt is getting overwhelming.
When you reach to this stage, you can’t dispute that you’ve accumulated too much debt. You’ll ultimately run out of options for borrowing money, and you’ll have to confront your creditors and loved ones about the debt you’ve acquired.
3. Your Personal Relationships Are Being Harmed by Your Debt
Do you purposefully keep your spouse in the dark about your financial situation? If that’s the case, you should examine your finances and figure out how to be proud of them.
You’ll need to find relief, whether it’s being honest with yourself about your situation or beginning to pay off bills till you are. Hiding financial information from family and friends is a sure indication that you’re in debt.
4. You Have an Excessive Debt-to-Income Ratio
You may utilize your debt-to-income (DTI) ratio, which is a crucial metric represented as a percentage that lenders use to assess you. Divide your entire monthly debt payments, including credit cards, loans, and rent or mortgage payments, by your gross (pre-tax) monthly income to get at this number.
For instance, if you earn $5,000 per month and have $2,500 in debt, your DTI is 50% ($2,500 / $5,000 = 0.5). A DTI of more over 40% is considered excessive by most lenders, particularly when applying for a mortgage. A DTI of 50% indicates that you have more debt than your salary can support.
Calculating your DTI is an excellent method to check your financial health even if you don’t intend to purchase a house or take out a big loan anytime soon. Keep an eye on it throughout time to ensure that it is always decreasing and never increasing.
5. Creditors Calling You Frequently
Constant phone calls from creditors or debt collectors are perhaps the most apparent debt warning indicator. These creditors may contact you at work or at home to inquire about past-due payments. They may even pass your information on to a collection agency, who will contact you on behalf of the creditor. You may have to cope with pay garnishment or the loss of assets in addition to the irritating, regular calls.
6. You’re Having Trouble Paying Your Bills on Time
Do you have trouble paying your expenses in between paychecks even when you are living on a budget? Your debt may be to fault if you find yourself attempting to match your paychecks with your expenses and paying bills after they are due on a regular basis.
In fact, simply to keep up with your monthly bill payments, you may be borrowing money or adding to your credit card debt. This pattern indicates that you are deeply in debt.
If you’re having trouble keeping up with your payments, you can generally shift them to coincide with your salary cycle. This will allow you to “time” your billing due dates to coincide with when you get paid. However, if you are spending more than you earn, you must either reduce your expenditure through setting up a proper budget or raising your income.
7. You’ve Been Turned Down for a Loan or a Credit Card
It’s stressful to wait for approval when it’s time to take out another loan. Stop and evaluate your position if you’ve been denied a loan or credit card, or if you can only obtain a loan on extremely bad conditions. You most likely have a debt issue if your high debt levels cause a lender to refuse or limit future loans to you.
Examine your credit reports for any errors or out-of-date information. Then, to enhance your debt-to-income ratio and creditworthiness, strive to pay off amounts.
8. You Depend on Payday Loans
Getting a cash advance is the worst way to utilize a credit card. Not only is the money lent to you on the worst conditions imaginable, but it often comes with hefty one-time fees, such as a fixed rate or a percentage of the amount borrowed. A $50.00 one-time fee, plus interest on any outstanding amounts, may be charged on a $1,000.00 cash advance.
Plus, if you take a step back and consider what the money might be used for, it’s likely to go toward an unexpected expense or an emergency. Saving for an emergency fund today will provide a safety net to assist offset or cover the amount you’ll need in the future.
Unless you have a real emergency, never take out a cash advance. Cash advances are a symptom of a debt issue when they are used for routine payments and expenditures. If you’ve already taken out cash advances to pay off debt, make it a top priority to return the advance to avoid incurring the much higher interest rate.
9. Lying To Others About Your Finances
Do you find yourself lying to your family or friends about your financial situation? Do you keep quiet about your spending habits? Do you have trouble sleeping at night because you owe money?
Do you make up reasons to skip lunch with the group at work a few days before payday? Are you concerned about what others would say if they learned about your financial difficulties?
If any of this seems similar to you, you may have a debt issue.
10. You’ve Exceeded Your Credit Limit or Have Been Rejected at the Point of Transaction
Credit cards are helpful for everyday expenses, particularly when the amount is paid off on a regular basis. You have a credit card debt issue if your card is maxed out or close to its maximum.
It’s time to stop borrowing and take stock of your position if you have to attempt more than one card at the register before one of them is approved.
11. To Remain Afloat, You’re Relying on Balance Transfers and Refinancing
For individuals seeking to reduce their interest rate for monthly payments, balance transfers, or the act of moving outstanding amounts from one card to another, are a frequent activity.
Many homeowners, meanwhile, refinance their houses to pay off recurring obligations. If you’re thinking about one of these two alternatives on a frequent basis, you’ve got a debt issue.
Using a refinanced home equity loan with lower interest rates than credit cards to pay off credit card debt may seem to be a smart option. Using home equity or other ways to pay off credit cards, on the other hand, has a significant risk of failure.
You must address the underlying reasons of your indebtedness and alter your behavior going ahead before taking on new debt to pay off current debt. Prior to taking on a new obligation, you should try to pay off the ones you already have. If balance transfers are necessary, go for one that charges minimal or no costs.
12. You’re Worried About Your Money and Can’t Sleep at Night
When you can’t sleep at night because you’re concerned about your expenses, it’s an indication that your debt has gotten out of hand. Debt-related stress is no laughing matter, and it may lead to a variety of severe physical problems.
Making a strategy to cope with your debt may relieve a lot of stress and, in extreme instances, it can even save your life. If that isn’t reason enough to seek help from a debt counselor, we don’t know what is.
13. You’re Completely Unaware of How Much Money You Owe
Burying your head in the sand won’t help you get out of debt. Stop neglecting your debt; now is the best moment to take control of your money.
Take a look at your most current account statement from your creditors and create a list of your debts so you know who you owe and how much you owe, and then establish a strategy to pay it off.
14. Using Credit Cards To Pay For Everyday Items
Using a credit card to buy food or pay your utility bills is another sign your debt might be out of control. If you lack the money to pay your routine bills, it might be time to face your debt.
15. Making The Minimum Payments On Your Credit Cards
The minimum payment amounts are designed to keep you paying for an eternity. The less you’re paying on the principal, the more you’ll be paying in the long run. If you’re unable to pay more each month and are stuck on minimum payments, you’re on a slippery slope.
16. Not Having Any Savings In The Bank
One sign of financial health is the ability to save money regularly through budgeting. If your monthly finances aren’t allowing for a regular contribution to your savings account, you’re probably playing with fire.
Carrying too much debt is a common occurrence in the United States. Debt can be likened to climbing a mountain with a boulder on your back. When you start to identify warning signs of debt crisis, it’s high time that you do something about it. The solution might be as simple as cutting back or as severe as filing for bankruptcy.
If any of the above warning signs of debt problems apply to you, then you need to assess your debt and put a plan into place that will ease your financial burden. You’ll be glad you did.