15 Signs of a Debt Crisis Brewing in Your Life
A very useful site on debt, interest rates, credit cards, and mortgage rates is www.bankrate.com.
In 2005, the site ran an article on 15 signs that indicate that a person has problems with debt. I list them here in bold and add my own comments.
1. Your credit card balances are rising while your income is decreasing. This indicates that you have not adjusted your spending habits to a looming crisis: reduced income. You must start cutting costs immediately, ruthlessly, or else get a part- time job.
2. You are only paying the minimum amounts required on your accounts, or maybe even less than the minimums. At a rate above 15%, you will be paying off this debt for close to 20 years. You are in debt bondage. Start paying off the card. Change your lifestyle.
3. You're juggling bills. For example, you apply for another credit card and use cash advances from it to pay an existing card. You are in quicksand. If you don't change, you will be trapped. Delaying a restructuring of your spending habits will make things worse.
4. You have more credit cards than a successful gambler has poker chips. You are playing games with creditors. Rest assured, they know what you're doing. The reporting system is electronic. They are ensnaring you. The new bankruptcy law makes it difficult for people to escape.
5. You are at or perilously near the limit on each of your credit cards. You are running out of time. You are running out of room to maneuver. Face reality now. Change your spending habits. Tear up the cards. All of them. If you need to use a card, get a debit card: you can spend only what you deposit.
6. You consistently charge more each month than you make in payments. You are falling behind. If you have seen the pattern, you know the problem. Most people don't see the pattern in time to escape.
7. You are working overtime to keep up with your credit card payments. You really are in big trouble. You have already tapped into your cushion: income opportunities.
8. You don't know how much you owe and really don't want to find out. Denial works against you and in favor of your creditors.
9. You have received phone calls or letters about delinquent bill payments. This means that the creditors are running out of patience. They will make your life miserable. They will not go away.
10. You are using your credit card to buy necessities like food or gasoline. If you pay off your card each month, no problem. If you don't, big problem! You must get a debit card. Stop using your credit cards for necessities.
11. Your credit cards are no longer used for the sake of convenience, but because you don't have money. This is the mark of someone close to the end. You act as though you will not be required to come up with the money someday. Yet you know you will. You are in denial.
12. You are dipping into savings or your IRA to pay your monthly bills. Pay off your credit card bills if you are doing this. Better to pay off your bills and cut your cards into pieces than to steal from your future in order to maintain your debt habit.
13. You are hiding the true cost of your purchases from your spouse. Call this what it is: betrayal. You are living off the credit of trust. When it's gone, it will be expensive to replace.
14. You're playing the card game by signing up for every credit card that sends you an unsolicited offer. This is a variant of #3 and #4.
15. You have just lost your job, or are fearful that you are about to, and are concerned about how you will pay all your bills. Good! Fear is good! Fear may be the only thing that will get you to face reality.
The article in Bankrate added this:
Don't wait too longAlan Olinger, vice president of sales and marketing for Money Management International in Houston, says it's far easier on families to seek help sooner rather than later.
"The best time to seek credit counseling is before all the extreme warning signs crop up," Olinger says. "Generally, it's easier to work with someone heading down the path toward financial difficulties rather than someone that's already reached that destination."
You can get out of debt. Dave Ramsey has written books about this. Get one of his books at your local library or through inter-library loan. Or go to his site, www.daveramsey.com.
Creditors will usually negotiate with someone who is about to declare bankruptcy. You or a representative can offer an easier repayment schedule.
There are ways out. Take one of them.
You are like a drunk or a drug addict who has just had a moment of truth. Don't stop now!
I have a department, Budgeting for Wealth, in the FOR MEMBERS ONLY section. There, I cover debt-reduction: the first stage on the road to wealth. If you've got the problem, I've got solutions.
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