In all areas of life, there are warning signs that tell us when something is wrong, and the same can be said for our financial life. According to financial experts, nearly 80% of Americans are in debt. That means about 8 in 10 Americans have some form of consumer debt, with the average amount being approx. $38,000 (not including mortgage debt). For most of the country, it seems owing money has simply become a way of life, and today, we’re going to focus on the top ten signs that your debt has become unmanageable.
#1: You Miss Payments
If you have begun to repeatedly miss your monthly payments, then you should ask yourself whether you are simply forgetting the due date or whether you’re consistently short of the funds needed to cover the obligation. This one usually results in a stack of mail stamped “Past Due” or worse, collection calls.
#2: You Shuffle Payments
Shuffling payments is another sign of debt overload. I call it the “Robbing Peter to pay Paul (and then owing John later)” problem. It’s when you use the money you were going to pay one bill with to pay another, and then hoping you can pay the original bill later. This will only put off the past due letter and collection calls for so long.
#3: You Use the Grace Periods
Using grace periods as a way of extending the amount of time you have to pay a bill is another bad idea. If your payment is due on the first and you are paying it any time after that, the payment is past due. You may not incur a late fee until a later day, but it is still considered late.
#4: You Approach Your Credit Limit
Being at or close to your credit limit is another big red flag. Not only does it mean you’re carrying a lot of debt, but it also has a negative effect on your credit score.
#5: You Use Cash Advances to Pay Another Card
Taking cash advances from one credit card to pay another bill is not recommended either, as this simply adds to your debt load instead of managing it.
#6: Creditors Close Your Accounts
If your accounts are being closed by creditors when you did not request it, that’s another big sign that you’re in trouble.
#7: You Look For New Cards to Help with Debt
If you are applying for new credit cards to cover the expenses of another credit card or debt, that’s another bad sign. More debt rarely fixes a problem.
#8: You Use Credit as Part of Your Budget
Using credit to subsidize your monthly budget instead of existing cash or available income is another big no-no. While refinancing debt can be beneficial in relieving debt overload, one must be extremely disciplined to take the extra money saved and reapply it to existing debt to keep paying it down. Plus, paying off debt with more debt still leaves you in debt!
#9: You Pay the Minimum Payment
Paying only the minimum payment is another red flag that many people don’t consider. The more you pay the minimum, the longer it takes to pay off your debt.
#10: You Don’t Know How Much You Owe
Finally, one of the biggest red flags is simply not having a good grasp of your financial picture or a plan for strengthening it. If you don’t know your total liabilities (total debt) it can give you a false sense of hope. Likewise, not having a budget can be equally problematic, sort of like going on a road trip to a new city with no map or GPS.
Debt can hide in many ways, and being able to recognize it can help you develop ways to solve your debt problems, but you have to be willing to start that journey if you want to reduce your debt burden (and the stress it causes). Luckily, there are a lot of tools out there to help.
In today’s high-tech world, there are hundreds, if not thousands, of websites and mobile applications designed to help you budget and set financial goals, many of them free to use, including the free financial library from Southern Bancorp, called The Opportunity Center.
But say you’re not too tech savvy. Well never fear, there are qualified credit counselors available, including from Southern Bancorp (yours truly being among them), who can provide one-on-one assistance with budgeting, saving, banking, foreclosure and other financial topics of interest.
So take some time to know and be able to recognize the signs of debt for yourself or your loved ones, and be willing to take the first step toward recognizing your debt and making a plan to tackle it. Your future, debt-free self will say thank you!
As always, if you have any questions about debt or any financial topic, please give me a call at 662-624-5776 or email me at Charlestien.harris@southernpartners.org. A strong financial future is possible for you, and we’re ready to help you get there. Until next week— Stay financially fit!
Charlestien Harris AFC/AFCPE
Credit/HUD Certified Housing Counselor
Southern Bancorp Community Partners