The use of credit cards and other forms of credit are so prevalent in today's culture that sometimes it is difficult to discern between regular debt usage and a debt problem. However, there are telltale signs which point to an out-of-control debt situation, or at least a situation that is about to spiral out of control.
Most financial experts agree that there is nothing innately wrong with responsible credit usage, but unfortunately not everyone has the restraint needed to pay off credit card balances each month and not borrow more than they can effectively handle financially. Look for these signs to see if you are heading toward a debt problem:
- You are having trouble keeping up with your payments. If each month you are having trouble making payments on your credit cards, or if you can only make minimum payments on all your debt, then this points toward a problem.
- You make late payments or skip payments altogether. Whether your payments are late because you forget, or because you can't afford to make them on time, this type of financial behavior indicates a problem.
- You are turned down for additional credit card accounts. If you apply for another credit account and the lender turns you down, find out why. If the lender cites the fact that you already have too much credit with maxed out limits, this is a sign of a debt problem.
- You use your credit card for every purchase, but don't pay off the balance. Many people use their credit cards for every single purchase in order to accumulate points and rewards. This isn't a good idea if you don't pay off the balance you incur every month. If you find that you run out of cash every month before payday and then use your credit cards for things like groceries, gas, and to pay other bills, it's a reliable sign that you have credit difficulties.
- You feel as though you have a debt problem. If the thoughts of your bills and rapidly mounting debt keep you awake at night, or if you find that your debt is causing stress to your relationship with your spouse, this is a valid indicator of a debt problem.
Solve Your Debt Problem
Simply acknowledging the fact that you have a debt problem is a big step in solving the problem. It takes perseverance to get out of debt, especially if you have grown accustomed to using credit as if they're going out of style. Here are some steps you should take to get your credit problem under control:
- Stop using your credit cards. If you stop using your credit cards, you will find that you reign in your spending dramatically. Using cash for purchases has a psychological effect that may make you spend less. At the very least, not using your credit cards means you aren't adding more to your credit card balances.
- Don't take out any more credit accounts. Until you have a grip on your debt usage, you should not apply for or accept any more credit accounts. You may find that when you get everything under control you don't actually need any new accounts anyhow.
- Write a budget and follow it. Compose a personal budget which allots you the money you need to pay your bills, buy the things you need, and have a little bit of spending money left over. Your budget will undoubtedly need some fine-tuning in the first few weeks, but once you get the hang of it you may find that you don't need to use your credit cards after all.
- Aggressively pay down your balances. Make a plan to reduce your debt. Some financial experts suggest systematically paying off each credit card starting with the card with the highest balance, while other experts suggest starting with the card with the lowest balance. Decide which system will keep you motivated, and get to work paying the balances down.
Redefine Your Debt Perspective
Once you stop thinking of debt as an easy way to get your hands on all the expensive things you want, you may find that credit cards and other debt accounts are unnecessary if you manage your money correctly. After all, a financial situation that does not involve monthly payments to credit card companies and other lenders is a comfortable situation indeed.