The average household in America carries at least $10,000 in credit card debt. Besides this, many people have upside down car loans, underwater mortgages and other debts that are difficult to pay off. While debt is an unfortunate part of modern life, racking up the bills can get you in serious financial trouble.
Here are 6 signs you’re carrying too much debt.
Your Whole Check Goes To Debt Payments
If all of your money goes towards paying your debt, you just might be carrying too much debt. Look at how much you spend on paying debt payments each month. Tally the minimum payments for your credit cards and compare it to your monthly income. If you exceed 50% on debt payments, you’re doing something seriously wrong.
While you can’t get rid of your debt overnight, you can work to eliminate unnecessary expenses like bloated cable packages, an expensive apartment or a car that’s too expensive. Sell off things you don’t need like a timeshare and put the proceeds towards your debt payments.
You’re Only Making The Minimum Payments
If you can’t afford much more than the minimum payments, or if those are even hard to come up with each month, you’re carrying too much debt.
Get on the phone and ask your credit card company to lower your interest rate. If you have a good history of paying on time and have a good credit score, you may get a positive reaction.
You can also transfer balances to a card with a lower rate or a zero percent introductory rate, but realize that balance transfers often come with fees.
You’re Sick Thinking About Your Debt
If your cards are nearly maxed out and you’re getting collection calls, you may be under a lot of stress. Stress from debt can result in physical side effects, such as illness, headaches and even high blood pressure.
If you’re suffering from physical side effects, it’s a clear sign you’re carrying too much debt.
You Got Denied For A Loan
If you have been denied for new credit or another type of loan, you are carrying too much debt. When your debt load is too high, it’s hard to qualify for new credit. Creditors and lenders look at your overall ability to pay back debt when they decide whether to open a new line for you, so if the rejection letters are coming in, you need to look at your debt load.
If you are using too much of your available credit (i.e. you’re maxed out) your credit score will suffer and you won’t be able to get any more credit.
You Don’t Have A Savings Account
You need to have a nest egg in case something goes wrong like you lose your job or have a medical emergency. The savings account will provide money in the event of emergencies, but if you spend all of your money on debt payments you won’t have any left to save.
To put money away, you’ll need to get a side job or look for a better paying position to help increase cash flow, or you can put off a major purchase like buying a new home or car while you build your savings.
You Pay Your Bills Late
Having too much debt can make it hard to make all of your monthly payments on time. If you’re missing due dates and sending late payments, it’ll hurt your credit score. Add that to the hit it already took from your huge debt load and you’re looking at years of rebuilding once you get your finances under control.
If you have a debt problem, the next step is to create a plan to eliminate the debt. You’ll need disposable income to reduce your debts, which means you’ll need to either sell belongings or take on another job. You can also try to reach a debt settlement with your creditors, but only explore that option as a last resort.