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Signs You Have Too Much Debt

Charles Dickens once said, “Credit is a system whereby a person who can’t pay gets another person who can’t pay to guarantee that he can pay.” In other words, we can visualize borrowing as similar to digging a hole for the borrower. The hole is used so that a person can safely hide and weather a financial storm. Some holes are shallow that a person can easily step out of it. But some holes become too deep that no matter how much clawing and climbing you do, you still know that you are way out of the path of the sun. Unfortunately, some people don’t know if the holes they are digging are reaching dangerous depths. Some people are not aware that they are getting in over their heads. Do you know of you already have too much debts? Here are some glaring warning signs.

First of all, you have no savings. You do not have the habit or the money to set aside funds for future use. When you have an extra hundred bucks, you like spending it to buy any trivial thing rather than saving it. Putting away money as savings is second nature to people who have sound finances. Second, you have two or three major credit cards. Do you really need all those credit cards? What for? To have more chances of borrowing money? Perhaps you have forgotten that each time you have your card swiped, you are borrowing money from a credit card company. Third, you use your credit cards for paying things that you used to purchase using cash, such as groceries and meals. This means that you are now relying heavily on plastic. Fourth, you make minimum payments only on your credit cards. When you pay the minimum amount only every month, you are letting the credit card company earn the maximum amount they can out of your debt. And fifth, as time goes by, the percentage of your salary used to pay off debts is increasing every month. Perhaps half of your monthly pay is set aside for monthly payments. If any of the five situations here applies to you, then you have a financial problem. Luckily, your problem is manageable and you can fix it by changing your spending habits.

However, there are financial problems that you cannot fix on your own. With ballooning debts, you need professional help. You are getting in over your head when you are in any of these situations. First, you are already near or at your credit limit on all your credit cards. Second, you don’t know exactly how much you owe or the total amount of all your debts. Third, you have issued checks that have bounced. Fourth, you have been denied when you buy something using your credit card. Fifth, you get calls from collectors. And sixth, you hide credit card statements or lie about them to your partner or to family members.

Small/Home Business Tips, Finance 2006-01-18 Home Business Tips