Debt isn’t always a bad thing. It can help you afford an education, buy a house, or start a business. Although having debt can put more buying power in your hands, it can also get you into a lot of trouble. If your debt reaches a certain point, it can be almost impossible to pay off. What makes uncontrollable debt even more dangerous is being completely unaware of the problem. Here are ten warning signs of uncontrollable debt you can use to assess your own debt load.
1. No Idea Of Total Debt Amount
Do you know how much total debt you have? If not, you may be ignoring a very costly problem. When people are unaware of how much money they owe, they have no sense of urgency to fix their financial problems. This only leads to continued poor spending habits and mounting debt. If you’re unaware of how much you owe, take out a calculator and financial statements to figure out your total debt. It might be painful to do so, but not knowing exactly how much money you owe can easily make your debt uncontrollable.
Once you know how much your total debt is, you will be in a much better position to correct your financial problems. You can also project how long it will take to rid your debt and what your living standards will be during that time. Taking these steps to prepare yourself will help you pay off your debt for good.
2. Living Paycheck To Paycheck
When people live paycheck to paycheck, it means that they can barely afford their living costs. If you can’t live comfortably with the amount of money you’re making, the two choices you have is to make more money or cut back on your expenses. Usually the easier of the two is to cut down on your expenses. Develop new habits to curb your spending and your debt load will become lighter and lighter. Eventually you’ll be able to put money from your paycheck into savings instead of your debt payments.
3. Frequent Letters And Calls From Collection Agencies
Having large amounts of debt is stressful enough, but when you add frequent letters and calls from collection agencies, things can feel even worse. Being harassed by collection agencies on a daily basis forces you to confront your debt head on. If you’re getting contacted by collection agencies on a regular basis, it’s really time to start changing your habits and ridding your debt.
4. Always Use Credit Cards
If you use your credit cards all the time because you don’t have any cash, you have a problem. This is basically the very thing you want to avoid, spending more money than you make. The problem with using your credit card all the time instead of cash is it’s easier to make frivolous purchases using a credit card than with cash. A credit card puts thousands of dollars right in your wallet and can be easily used just about anywhere.
If you’re making all of your purchases on your credit card because you don’t have any cash, it’s definitely time to start cutting back on your spending. Leave your credit card at home and keep a small amount of cash in your wallet to avoid unnecessary spending. Carrying and paying with cash makes you see the dollars leave your hand which can be a lot more difficult than simply swiping a card. By limiting your spending, you’ll be able to eventually conquer your credit card debt and live a richer and more financial free lifestyle.
5. Use Payday Loans And Cash Advances
Payday loans and cash advances are two of the most expensive ways to obtain cash. If you’re using payday loans and cash advances, it points to the classic problem of overspending. The danger of using payday loans and cash advances is that they’re designed to snowball very quickly. Some payday loans have finance charges and annual percentage rates over 300% (this makes even credit card rates look good). If you use payday loans and cash advances, pay them back as soon as possible and cut back on your spending. It is very risky to leave these debts unpaid.
6. Multiple Maxed Out Credit Cards
Having many maxed out credit cards is one of the biggest warning signs of uncontrollable debt. If you have more than one credit card that’s maxed out, your debt will grow very quickly. Unless you change your habits, it’s likely that you’ll take on new credit cards and more debt. To deal with this warning sign, the answer is simple: spend less. It is easier said than done, but if the problem is ignored, it will only grow worse.
7. Have No Idea How Much You Spend
Having no idea how much money you spend is just as bad as not knowing how much debt you have. Without knowing these numbers, you’ll have a much harder time adjusting your spending habits to get out of debt completely. Fortunately, this problem can be solved using nothing more than simple math and budgeting. Pull out credit card and bank statements to see how much money you spend per month. Knowing how much money leaves your hands per month will help you create a realistic budget to beat your debt. It will also give you a time table for how long it will take.
8. Only Pay Minimums On Credit Cards
Paying only the minimum on your credit cards can make it almost impossible to beat your debt. The way credit card interest works greatly disadvantages the consumer. This can easily lead to repayment cycles that last for decades. If your credit card debt is getting bigger and bigger each month, there’s no better time to change your spending habits than now. The longer the problem persists, the exponentially worse it will get. As mentioned earlier, it is important to limit your spending and budget your money to improve your financial situation.
9. Stress, Anxiety, Depression Stemming From Financial Problems
Having large amounts of debt can lead to unhealthy levels of stress, anxiety, and even depression. Taking an emotional hit from your troubled financial situation is never any fun. If you find that your debt is always on your mind, it is important to take action and start dealing with it. Once you take more control of your financial situation, it will give you enough satisfaction to continue working towards paying your debts off.
10. Borrowing Money From Friends And Family
If you’re frequently borrowing money from friends and family just to get by, there’s a good chance you’re on the path to uncontrollable debt. Borrowing money from friends and family can be especially troublesome if the money is never paid back. When this happens, friendships and family bonds can easily fall apart.
If you are borrowing money from friends and family, add up all of the money you’ve borrowed and pay it back as quickly as possible. If you’re having trouble paying it back, keep your lender friend or family member informed. It’s important to cut down your spending to show that the money is actually necessary and not just a handout.