A lot of American consumers pile up credit card debt recklessly. They are simply oblivious to the perilous situation they are in. This is rather unfortunate because the warning signs are all around them. All they need to do is to analyze their situation carefully. Things might go out of control if you do not wake up in time. So watch out for the following warning signs:
- Your mortgage/debt payments are too high: Is your mortgage payment or debt payments more than 30% of your gross monthly income? A positive answer would mean you have reasons to worry. According to financial analysts, your debt payments should not cross a certain percentage (ideally 30%) of your income. If they do, your financial balance will be disrupted and a crisis situation will follow.
- You have no rainy day funds: It is very important to maintain an emergency fund. Make sure that you contribute to this fund even when you are financially low. Otherwise, you will have nothing to fall back on if you face an emergency. When you have no emergency fund at all, you should sense trouble.
- You have drained your savings account dry: Savings account, like emergency fund, is another safety net. If your savings is nil, you are certainly not heading in the right direction. Bring down your standard of living, follow budgeting, and do whatever is necessary to save a substantial amount.
- Excessive dependence on credit cards: You completely rely on credit cards to run your family. You even use plastic to pay for groceries. This simply means that you are borrowing continuously to support your existence. You are trying to run away from reality. You must realize that buying on credit will bury you deeper in debt.
- You have maxed out the credit limit on most of your cards: This reflects, just like the previous case, that you are borrowing too much, perhaps more than what you can afford to. May be you are running short of money, or you may have too much debts or your expenses might be too high. Whatever the reasons are, your situation is quite perilous, and its time for you to wake up.
- You are not too sure about how much you owe: You know that your debts are spiraling out of control and you cannot admit it to yourself. This attitude is not going to help. Your situation will get from bad to worse and you will eventually need to deal with your debts. So you better take care of things right now.
- You are a regular customer of cash advance stores: Payday loans can be a helpful option if you are in some kind of financial emergency. But a lot of people become completely dependent on payday loans for paying their bills. If this is your case then you are treading along a dangerous path. Taking too many payday loans shows that your financial situation is alarming. Remember that indiscreet use of payday loans can force you to file bankruptcy.
- You are hiding important financial details from family members: You are keeping your family members in the dark regarding your monetary situation. You get angry when they ask you questions about family finances. It simply points out that you are trying in vain to hide the truth. Solve the problem by facing the situation.
- You are getting too many calls from the creditors: Creditors are calling you throughout the day, and they are getting rough with you. In such a situation, you hardly need to be reminded that your finances are in a pretty bad shape. Instead of skipping the calls, take them and explain your situation to the creditors.
- Thoughts of bankruptcy in near-future: If the dark shadows of bankruptcy are clouding your thoughts then things are very serious indeed. Bankruptcy, though a debt relief process, can be harsh on the consumers, and it is considered as a last resort. So if you are thinking that bankruptcy can be your option in the future then get cautious.
It’s not easy to free yourself from the clutches of debt when you are deep into it. So remember the above points and get your plans in order before it’s too late.