Debt Warning Signs and How to Get Out
Over the past decade, an insane amount of debt has been wracked up. Household debt has significantly eaten up a slice of personal income since around the mid 90s. Here are four clues that you are carrying too much debt:
Clue 1 - Your debt to income ratio is too high. Your debt to income ratio is calculated by dividing your debt on a monthly basis by your monthly income. If your debt to income ratio is 15 percent, 20 percent or worse, you are definitely in trouble according to most credit counselors.
Clue 2 - You have no savings to speak of. If you have no savings to speak of, then your money is stretched too thin. You need a savings account and you need to start meeting your debt obligations and your savings obligations.
Clue 3 – You are over the limit on your credit cards. Straying over isn’t bad unless you’re not paying it off right away. If you are carrying a significant balance from month to month, you have a problem that needs to be stopped now.
Clue 4 - You find yourself worrying about your debt. If you are stressing about your bills or your debt, then it is clear that you have a problem, plain and simple.
Here are four tips that will help you get out from under your debt.
Tip 1 - Prioritize your Bills and your Debts. Write down how much you owe to each of your monthly bills and prioritize this list. Give priority to health, food and shelter, because these are the bills that need to be paid first and foremost.
Tip 2 - Stop using your credit cards and pay with cash instead. Cut them up, freeze them in ice or feed them right into a wood chipper. Stop relying on credit to solve your problems because it is not going to help you, but rather will only make things worse. Limit yourself to cash if you want to control your spending.
Tip 3 – Set up a plan that will allow you to pare down your debt. Call creditors to find out if you can get lower rates, or to have fees waived. Try to set up a better payment plan if you can. Most creditors are more than willing to work with you but you absolutely have to work the courage up to ask if you want to get results. When you pay down your credit card debt, target the highest interest rates first and then work to the next highest, and so on and so forth.
Tip 4 - Get help as soon as you know you need it. There are credit counseling services out there that can sit down with you and counsel you on your spending habits, helping you create a repayment plan for your debt that is affordable and workable. Choose a service that is free or inexpensive if you need help, and formulate a plan that will make paying your debts down easy and affordable without bogging you down with more bills or more debt.
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