When to Know You're in Trouble with Debt

Do you have debt? Can you tell when you have so much debt that you're in (real) trouble? We'll explain how to grade your debt in a minute, but first, count how many of these apply to you:

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  • I don't have enough money to pay my bills most months.
  • I've stayed awake at night worrying about bills.
  • I worry about not saving money regularly.
  • I regularly borrow money to pay bills. (And "borrowing" money means using a credit card to pay a bill, and then financing that payment.)
  • I'm not honest about my debt with a person I'm close to.
  • My total debt increases regularly each month (do I even know my total debt?)
  • When I'm honest with myself, I think, "I have debt problems."
  • I regularly make only minimum payments on my credit cards.
  • I would be in (even more) trouble if I miss one month's pay.
  • I've been turned down for a loan because of my credit or total debt.

How did you do?

First, the good news: At least two of these situations apply to most of us at times. A lot of us don't save money regularly, and a lot of us who are responsible about debt still worry about it.

And another piece of good news: Admitting that you worry about debt is a first step in fixing it!

Here's why: You've probably learned from experience that debt is not "good." Debt may be necessary in very limited circumstances (like when you are buying a home, or really need a car). But unsecured debt (such as a credit card or a personal loan) is not good.

Do you agree with that? Okay, then, you're ready for the bad news about debt.

If even two of the situations previously listed had you thinking "That's me!", you need to take a deep breath and act on your debt now.

Here's how to start:

  • List all your debt (and the amounts). Compile it in one clear, short page. Looking at your debt numbers is a great way to give yourself a look at the big picture, and may literally scare you into stopping (more/other) impulse charges.

  • Put away your credit cards. Do not use them for everyday purchases or impulse buys, even if you have to borrow money from your piggy bank to eat. Instead, try using them occassionally, charging amounts that you know you can pay off only.

  • This week, see if it is possible for you to refinance or consolidate your credit card debt at a cheaper interest rate. Refinancing credit card debt for some of us is a definite way to cut debt.

  • This month, look at your recurring bills. Can you cut any? Can you cut back your phone and web services? Stop heating or cooling your home when you're not home? Eat out less? Look at every bill closely, learn from it, and be creative.

  • Talk with the credit union's credit counseling service. Do not hide from your debt, ever. It will make it more expensive! A credit union usually is the best and cheapest way for a consumer to refinance and reduce debt.

  • Look at the FoolProof resources on this website. None of them come with commercials or advertisements, and all of them tell you the truth about debt and help you to be smart with your money.

This week, you can begin taking control of your debt and reduce worry as you take control.

Wouldn't that make for time well spent?

Good luck out there.

Cheers, Will

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