For better or for worse - debt has become the norm and a sort of a staple in our society. Loans are given for most every item you can think of- from homes to cars, to laundry machines and TVs. Add to item-specific loans the massive amounts of credit card debt we carry as a collective-- the numbers are staggering. Most people don’t outright own most of the things they possess. So while carrying debt has become commonplace, at what point in a person’s life does debt go from being okay- to not?
1. Are you having trouble making minimum payments?
Are you struggling to come up with minimum payments on a regular basis for all your debts? If so, this is a very clear indication that you are in over your head and your debt has become a huge problem.
2. Does your total debt increase each month despite making payments?
If your debt is running in the opposite direction to pay off, there is an issue. Are you taking out new credit cards or loans? Are you making minimum payments that don’t even cover the interest accrued? These are signs that you are spending above your means (or more than you make.) While this habit can be sustained for certain lengths of time, the payments and resulting debt will catch up with you. When the payments and totals catch up, where will you be?
3. Do you have irregular income that fluctuates and doesn’t allow you to make regular payments?
Late fees and penalties will eat a borrower alive. If you do not have the means to make regular payments, beware.
4. Can you not keep track of all the payments you need to make?
If the number of loans and credit you have out have created so many payments that it is hard to keep track of, this could be a sign of being well overextended.
5. Most important of all, regardless of the amount of debt you carry, do you feel overwhelmed, uncomfortable or stressed by your finances?
You need to take heed of your intuition and your gut telling you that there is a problem. Don’t ignore these internal calls for help. It doesn’t matter if your friends and family have more debt than you and your situation seems “Okay.” If it doesn’t work for you, it doesn’t work for you.
If you feel like you might have a debt problem, you need to decide what place debt has in your life. Are you comfortable carrying the debt or would you feel more at ease without the extra weight? What amount of debt are you comfortable with and is it in your best interest? If you decide to pay off any amount of your debt, you will need to start with a plan. List out all your debts from smallest to largest and start throwing any extra money you come across at this debt. Once the smallest debt is paid off, you will start applying that payment amount, plus any extra you can come up with, toward the next smallest debt. This is called the debt snowball method and it has worked for a number of people. If this doesn’t work for you, that’s fine. Do some research and find a method that will work for you. By following a budget, selling things you don’t need, and living below your means, you will start working toward finding the cash to square these debts away once and for all.
Whatever path you choose, create a plan and a budget- then stick. To. It. Keep your goals and intentions front and center and learn to be content and grateful for the things you have while you climb your way out of the hole. Your future self will thank you!