If you find yourself in a difficult financial situation, it can be hard to know where to begin. Dealing with debt can seem like a labyrinth of numbers and ideas, without much direction on how to fix things. But debt is almost always the result of poor money management, not cosmic forces beyond your control.
However, if you feel like you are drowning in debt right now, that doesn’t mean that it’s too late to turn things around. Debt problems don’t have to be permanent; there are steps you can take to improve your situation and get back on track sooner rather than later.
This article will go over some common signs that indicate you may have a debt problem, along with some good advice on what you can do about it.
Typical Signs You’re Carrying Too Much Debt
If you find yourself with more debt than you can realistically pay back, you may be carrying too much. There are a number of ways that you can recognize this.
One sign is if you have a sudden increase in debt. Debt has a way of accumulating over time, so if you suddenly find that you owe more than you used to, it might be a sign that you’ve got a problem on your hands.
Another way you can tell if you’re carrying too much debt is if you continually delay payments. This could be because you have trouble paying all the bills at once, or you don’t have the money to pay them at all.
There are many other warning signs that you might have too much debt at the moment. Let’s go over eight of the most common red flags so that you can recognize the problem, take steps to resolve the situation, and get back on track.
You make minimum payments.
Many people get into debt when they overestimate their ability to make debt payments, especially when it comes to credit card debt. One of the signs that you are having trouble with your credit card payments is if you are only making the minimum payment each month.
The minimum payment required on credit cards is typically 2-3% of the total balance. While that may not sound like a lot of money, it actually is a lot more than the person who is living from paycheck to paycheck might think.
Depending on the amount of debt you have and the interest rates associated with it, minimum monthly payments may be incredibly difficult to make each month. If you are struggling to make these payments, then this is a clear sign that you may have a debt problem that needs to be addressed.
Your minimum monthly payments are large.
Another sign of trouble is if your minimum monthly payments are higher than you can reasonably afford. If you are struggling to pay off a large amount of debt, it is important to prioritize your payments and make sure they get paid off as soon as possible.
However, if you are putting off the minimum payments and letting your other bills go unpaid, you may find yourself in worse shape than when you first started. If your minimum monthly payments are large, it can be a sign that you will have trouble paying them off even in the long term.
You’re struggling with debt collectors.
If you find that your credit card debt has already gone to collections, it may be a sign that you have a serious debt problem. However, it’s also important to note that this doesn’t necessarily mean that you have to default on your debts.
When you are in debt collections, you may be offered a lower payment plan to help clear your debt. However, if you owe a large amount of money and your minimum monthly payments are already out of your reach, you may want to consider debt consolidation.
You’re using balance transfers and refinancing to stay afloat.
Balance transfers and refinancing a loan are ways of paying off debt by finding a new lender to pay off your existing debts. Although these methods can be helpful in some situations, they are often a sign of desperation.
If you are using balance transfers or refinancing to pay off old debts, it may be a sign that you are struggling to pay off your current debts. If you use these techniques to pay off one loan with another loan, you may find yourself struggling with debt again soon.
You rely on cash advances.
Cash advances are loans that you take out directly from your credit card company. While they can be helpful in certain situations, they can also be a major red flag if you are using them regularly. So, if you are using cash advances to pay off your debt, that’s a clear sign that you need to take steps to get back on track financially.
You’re being denied for loans or credit cards.
If you have been turned down for a loan or a credit line recently, it may be a sign that your debt is too high. In many cases, banks and lenders consider your debt-to-credit ratio to be a measure of how risky it is to lend you money.
If your debt-to-credit ratio is high, it can make it difficult to get approved for new loans and lines of credit. If you are being denied for credit cards and other loans, it may be a sign that you need to take additional steps to get your debt under control.
You’re not building your savings.
There is nothing wrong with debt, as long as the amount you have to pay off each month is less than the amount you are earning. When you are building up savings and avoiding debt, it can make it easier to pay off your loans and bills in the long run.
However, if you are focusing all of your energy on paying off debt without saving anything, it can be difficult to get out of debt in the long term. If you are focused only on paying off debt and not building savings, it can be a sign that you need to take steps to get your debt under control.
Your debts are affecting your personal relationships.
One of the signs that you have a serious debt problem is if your debts are starting to affect your personal relationships. If your significant other, friends, or family members are becoming concerned about your debts, it may be a sign that you need to take immediate action to resolve your financial situation.
When your debts are affecting your personal relationships, it can make it even more difficult to get out of debt. If you have a serious debt problem, it may be time to seek out debt help and get back on track with your finances.
What Should You Do If You Have a Debt Problem?
If you have been struggling with debt lately and you think that it may be a sign of debt problems, there are a few steps you can take to get your finances back on track. First, you should look over your finances and see where your money is going each month. This can help you identify unnecessary expenses that you can cut out or reduce to have more money to put toward debt each month.
Next, you can create a budget to help you determine how to best spend the money you have each month. The trick here is to be honest and detailed, account for everything you spend money on, and look to see where you might be able to cut back your spending. Finally, you can take steps to pay off your debt. This may be easier said than done, but there are several ways you can do it.
Debt Consolidation
When you find yourself facing high debt, the most important step that you can take is to figure out how much you actually owe and how much you can realistically pay back. While it’s often a good idea to pay off as much of your debt as you can, it’s also important to keep in mind that high debt can lead to high-interest rates.
If you pay off a large chunk of debt but then find yourself with a significant balance left, that will also increase your interest rate. So, the best thing to do is to figure out how much you actually owe and how much you can realistically afford to pay back.
Once you have an idea of these two things, you can start negotiating debt consolidation loans. If you have a high-interest rate and a lot of small debt, it may be worthwhile to take out a consolidation loan that allows you to pay off all of your debts at once.
Debt Management Plan
If you’ve been struggling with debt for a while, or if you find yourself in a situation where you just can’t make your debt payments each month, you may want to consider taking out a debt management plan (DMP).
A debt management plan acts as a means to help you manage your debt while you repay it, rather than paying it off in full. Depending on the terms of the DMP, you may have to make a small lump sum payment at the beginning of the month, or you might have to pay a fee for using the DMP.
At the end of the DMP term, you will have paid off a good portion of your debt. This will likely be less than if you had made your regular monthly payments during the DMP term, but it will be much better than not paying at all.
Bankruptcy
If you’ve been struggling to make your debt payments for a while and you’re close to filing bankruptcy, you may want to consider filing bankruptcy. This is not a way of getting out of debt but of restructuring it in a way that allows you to keep your debts and pay them back at a later date.
The laws surrounding bankruptcy vary from state to state, but in general, you can file bankruptcy if you can’t pay your debts, they are too high, or you have already tried to repay them. Keep in mind that filing bankruptcy doesn’t mean that you are a bad person; it’s a way to reorganize your finances and make it possible for you to pay back your debts at a later date.
Conclusion
Before you start panicking, it’s important to keep in mind that even if you have a debt problem, it can be solved. Debt problems don’t have to be permanent; there are steps you can take to improve your situation and get back on track sooner rather than later.
Once you have a good idea of how much money you owe, you can start looking into debt consolidation loans, debt management plans, and bankruptcy. These are all ways to get your finances back on track while keeping your debt manageable and under control.
