Excessive Debt

Learn how to recognize when you have too much debt on your hands, and what you should do to avoid high debt.

How do you know when you have too much debt on your hands? You can usually tell when financial burdens have gotten to be too large — you’re constantly worried about them. But just to make sure, we’ve outlined some tell-tale signs that point to financial trouble:

You can only afford to pay the minimum payment on your credit card bill – Paying only the minimum payment on your credit card more often than not only covers the interest charges — you’re not making your balance any smaller. Credit card companies love consumers that only pay their minimum dues because that’s where they profit. By paying the bare minimum, chances are you will never get your balance down to 0, so make sure you pay off as much as you can possibly afford and don’t let credit card companies profit off your mistakes. If you own more than one credit card, get rid of all except one, and use it only for emergency expenses.

You’re going over your limit on credit cards and/or checking accounts – Overdraft charges can be a real budget killer, and you’re essentially giving money away. When you notice that you’re regularly overdrawn, it’s time to reassess your financial standing and find out what’s wrong. Contact your bank or credit card issuer and talk to them about overdraft protection; it could save you a lot of money.

Finances are the main topic of discussion at home – If you’re noticing that finances are becoming a mainstay topic of discussion – or debate – in the household, you’re most likely struggling to keep up. You may notice that you’re getting into arguments with your significant other over money issues on a regular basis. Instead of arguing, set a strict budget that you both agree on and keep track of your spending.

You don’t have savings – Maintaining a savings account is a huge part of a healthy financial life, and one that most Americans skimp on. It is recommended to keep at least six months worth of pay in a savings account in case unexpected circumstances arise: see more on that topic here. Try to put away a portion of your paycheck into savings each month, as it can cover you when you most need it.

You’re having trouble paying all your bills – If you find yourself having trouble paying all your bills – e.g. cable, internet, phone, etc. – keep the essentials you cannot live without and let go of the luxuries. For instance, if you have both a home phone and a mobile, letting one go can free up money for other bills.

In addition to the abovementioned, here are some other red flags that can signify too much debt:

Post-dating checks
Paying bills late
Selling treasured valuables
Taking out a cash advance to pay another bill
Borrowing money from friends and family
You live paycheck to paycheck

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