Using credit and good debt can be very powerful to allow you to buy a home, a vehicle, or send your children to college, and provide leverage for other purchases. But if you accumulate too much debt, it can pose a serious debt issue. You should not let it happen to you because bad debt can bog you down and prevent you from reaching your financial goals. Keep yourself alert with the warning signs of too much debt as stated below, so that you can handle it as early as possible before it become too serious to address.
Sign #1: Big Portion of Your Income Is Used To Pay Debt
You are afford to pay the monthly due for your credit card and loan payment, but the debt payment has eaten up a big portion of your income. After paying down your debt, the money left is just enough for you monthly expenses, you do not have extra money for savings and other wealth creation plan for the future.
Sign #2: You Do Not Have Savings For Financial Emergency
Financial emergencies can come in the form of a job loss, medical expenses or auto repairs. If do not have extra money to save for any financial emergency needs because your income is used to pay your debt and cover your existing expenses. It can be a sign of too much debt that prevent you from having a savings.
Sign #3: You Pay The Minimum Due Of Credit Card Balance
Paying the minimum due of credit card balance is one of key factor that caused many people trapped into debt problem. If you tend to pay just the minimum due of your credit card balance, the rest of credit card debt will snowball to a bigger debt with new debt added by your credit card purchases and high interest rate charges. It is a clear sign that you will face debt trouble if you continue your spending behavior and no action being taken to resolve your debt.
Sign #4: You Have At Least One Credit That Reaches The Maximum Credit Limit
If you have paid your credit card balance, it will not reach to the maximum credit limit, unless your keep buying your credit cards and pay just the minimum because your income is not enough to cover your expenses. This type of spending behavior definitely will drag you into a debt trouble. If one of your credit cards reaches the maximum credit limit, you are at the high risk of facing debt trouble.
Sign #5: You Use Cash Advances From Credit Card To Pay Bills
You use your credit cards like ATM cards: withdraw cash advances to pay your bills. The use of cash advances to pay for bills shows that you have negative cash flow which your outgoing cash (spending) is more that your incoming cash (earnings). Cash advances carry high interest rate, it is a bad idea to use the cash advances to pay bills. If you have done so, it’s a clear sign of too much debt.
What You Need To If You See The Signs Of Too Much Debt?
Takes Actions Now!! Don’t let your debt snowball to bigger debt, until your financial can’t afford to pay it. You should come with a budget plan and cut away those excessive expenses. Don’t ignore the signs of too much debt; instead you must take action to bring your financial to a healthy level.