5 warning signs of excessive debt

Not sure if you’re in too much debt and worried you’re going to get in trouble? Many French have the same concern. After all, unlike the fuel gauge in your car or the smoke detector in your home, there’s no useful device that tells you when you need debt relief.

Although banks use the debt ratio formula based on the debt-to-income ratio, it is very likely that they will give you more credit than you can handle.

Here are five warning signs of a debt problem and what you can do:

Overreliance on credit: the first warning sign

Excessive reliance on credit is one of the most common signs that you are in too much debt. But what does that actually mean? It’s not as simple as looking at how much money you owe or how many credit reports you have. If you rely heavily on credit, it means that you cannot cover your daily expenses with the money you earn each month.

Here’s how to find out where you are. Imagine that you can’t buy anything on credit tomorrow. If you’re already making payments on a house, student loan, or car, that’s fine, but you can’t use credit cards or lines of credit anymore. How long can you do this? week ? Month ?

If you think you can last a month, put that confidence to the test and stop using the credit for 30 days. This means that to buy groceries, clothes, or something else, you will only use the money from your checking account and the cash from your wallet. This is certainly not very practical, especially for products and services such as subscriptions or phone bills.

So what can you do instead of relying too much on credit? When there is a payment that needs to be made using a credit card, pay it off on the same day through online banking.

If this is not possible, put the payment amount in an envelope or in a savings account (eg revolution) and don’t touch it until 30 days have passed. If you find it difficult to buy things that you would normally buy without a second thought, you may be relying too much on credit in your daily life.

You only pay your minimum debt: The second warning sign

Making only minimum payments on credit cards is a trap that unfortunately many French people fall into. After all, you’re still making the monthly payments your creditors demand, and you may still have a good credit score. However, lurking behind this illusion of stability is a widening chasm of progressive dangers.

Why is minimum payments a problem? Making only minimum payments means that you are only keeping up with the times, but not going ahead and paying off your debt in a meaningful way.

The interest you pay eats up the money you could spend, which can cause you to use more credit to compensate. This new credit will carry its own interest, thus continuing the cycle.

Before you know it, your credit may be so high that you can’t even make the minimum payments, and that’s just the tip of the debt iceberg. It’s a red flag that you need help ASAP, especially if you’re using other forms of credit — like a high-interest payday loan or cash advance — to pay down debt you already have.

So what can you do instead of just making minimal payments? It is necessary to reduce your expenses. If you are nearing a debt cliff, seek help immediately. You’ll have more debt relief options if you do this, and you’ll sleep better knowing you have a plan.

Not Budgeting: The Third Warning Sign

Those who do not plan what they will do with their paycheck simply do not know how to manage their budget. Does this sound like you too? It is true that some people do very well without even thinking about making a budget.

Others deal with an alternative method of budgeting where they just list their expenses rather than keeping track of their bank accounts from memory. However, most people with debt problems can see a real and immediate improvement in their financial situation once they set a budget and follow through.

Why isn’t using a budget a problem? Many people feel overwhelmed by the idea of ​​creating and following a budget. They don’t like having to keep track of their expenses. It can be stressful, but ignoring the expenses won’t make them go away. It will only be difficult to get your money back on track.

A budget just helps you stick to the choices you make ahead of time about how you use your money. In the end, having a plan and sticking to it will do you more good than any financial plan. The best debt aid organizations also offer budgeting assistance.

No savings for a financial emergency: the fourth warning sign

If there is one thing the past few years have shown us, it is that anything can happen at any time and that it is necessary to make some savings just in case. financial emergency. Being prepared for unexpected expenses is one of the best solutions to a debt problem because when an emergency happens, you don’t need to get into debt.

However, when you’re already heavily in debt, can only make minimal payments, or don’t follow a budget, it’s hard to set aside money for the inevitable rainy days. However, saving is one of the most important expenses when budgeting. It is almost impossible to get out of debt without it.

If you are unable to Build savingsYour debt may be higher than you think. The longer you wait for professional credit assistance, the more time you will spend being exposed to the financial unexpected.

Worrying about the amount of your debt: The fifth warning sign

If you are considering your debt level and wondering if it is too high, you likely have a problem. When it comes to your financial health, you can never be too careful. The fact that you care about your debt and that you’ve read this means that it’s worth taking the time and effort to figure out how to pay off your debt and get back on track.

the solution ? Debt is a symptom, so it is important to dig deeper and identify the reasons why you are in debt. Until you know the cause of your debt problem, you will not be able to explore possible solutions. No one knows your situation better than you, so if your intuition tells you that you need to change something, listen to it.

We know that taking the first step to settling your debt can seem like a huge hurdle to overcome. However, by taking this step, you are setting yourself on the path to a better financial future for you and your family.