Debt is a fact of life for many people. It’s the way they pay for their homes and other big ticket purchases and, if it’s managed sensibly, it’s absolutely fine. But, taking on debt is a commitment that shouldn’t be taken lightly. Taking on too much could cause your finances to spiral out of control and leave you with a big problem that has a drastic impact on the way you are able to live your life.
So, how do you know that your debt has stopped being manageable? Are there any ‘rules’ you can apply to gauge your financial wellbeing? Here are some warning signs that you should look out for…
Stretching your pay packet
Are you always struggling to find the funds you need? Do you have to turn down your mates when they’re off to the pub because you’re out of cash? Perhaps you always find yourself putting off purchases until after payday? These can be fairly early warning signs that all is not well, often because servicing your debts is not leaving you enough disposable income to cope with everything life throws at you.
US site Sing Saver offer a useful ‘ratio’ to try to stick by. It suggests adding up your total expenditure and comparing this to your total income. If that income reaches 80 per cent then you should treat it as a warning sign that all is not right. If and when you reach 100 per cent then you have to act immediately to stem the tide.
Losing track of your debts
While you’re working out your debt ratio, you also need to consider the nature of your debt. Control doesn’t just mean affordability, per se, it also means knowing what you owe and who you owe it to. If you’ve got store and credit cards, an overdraft and different loans, each with different payments on different dates with different interest rates then you’re likely to be out of control.
If you don’t, off the top of your head, know the terms of each of your debts then it’s probably a useful warning sign to act. AvantCredit is one lender that can offer you a debt consolidation loan to make your life much simpler – bringing all of your debt together in one bundle with one payment, one interest rate and one clear goal in place to get you on the path to being debt free.
Money on your mind
Large repayments and a large number of debts are practical signs that you’re losing control, but the way you think and feel about money is vital too.
Financial problems can be one of the biggest causes of stress and have a big impact on your mental health. If worries about money are stopping you sleeping, are the first thing on your mind when you wake up or are regularly the cause of arguments between you and your partner then you know things are going wrong.