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5 Ways to Know You Have Too Much Debt

Have you been taking a lot of loans lately? Read more to understand when your debt situation isn’t going well.

Being indebted to someone is never a good feeling. However, at times, you have no other option but to borrow. While it’s understandable, it’s also wise to keep check of all your debts to know where you stand. If you begin amassing too much debt, you must know when to stop and get a better handle on it.

But how does one keep track of their debts, especially when they’re just too many? It may be tricky, but you’ll have to be vigilant of your expenses. You’ll have to be cautious and watch for signs that tell you your debts are getting out of hand. As long as you’re managing your debts well, you shouldn’t have a problem.

Let us elaborate on the indications you need to look out for.

1.   You Live on Your Salary

When you get a specific sum every month and only survive the month based on that, your finances aren’t looking too good. Living paycheck to paycheck isn’t wise, and it certainly isn’t comfortable. So, if you run out of your salary before your month ends, it’s about time you get on top of your finances and start taking better care of them.

2.   Constantly Using Credit Cards

Another sign you have too much debt is when you’re using your credit card for simple run-of-the-mill purchases. The money you use through your credit card isn’t yours; it’s the bank’s. So, it’s simple to use it at the moment as your psychology tells you it’s the convenient way. However, each time you swipe a credit card, you owe money to the bank. Basically, you’ll end up having more debts.

3.   Inability to Make an Emergency Fund

When you start earning money, the smart thing to do is immediately make an emergency fund. Keep aside a certain sum each month and put it into your emergency fund. However, if you’re unable to do so, you’re too far into your debts, and it’s time to take some control back. Making an emergency fund is the wisest thing to do with your money, and it’s not the best sign if you’re unable to.

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4.   Your Debts > Your Income

Say, for example, you earn $2,000 per month, and your expenses total about $3,000. If your expenses and debts are more than your income, how can you possibly pay them off from your earnings? It’ll take way too long to do so, or you’ll find yourself in more debt. Getting more debt to pay off existing debt is never a solution and a pretty terrible idea as it makes your financial situation a lot worse.

5.   Failure to Make a Retirement Plan

If you know a thing or two about finances, you’ll learn it is necessary to have a retirement plan. It’s your planning for the future. You must have money on the side to make your post-retirement life easy. If you aren’t able to do so, it’s because all of your money is going into paying off debts. So, it’s a sign you need to manage your finances better if you wish to stabilize your financial condition.

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Written By

Travis Barnett is an expert in finances backed by 10 years of experience as a financial analyst at CNB. He graduated from UCLA's Anderson School of Management in 2010 and has been in the field ever since. Travis now enjoys sharing his business experience with others as a financial writer in San Diego. In his spare time, he enjoys hitting the links and working on his golf swing.

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