There is no shortage of dialogue about how challenging debt problems are for many working and middle class Americans. According to a recent article by Money titled, “Americans Have So Much Debt They’re Taking It to The Grave,” 73 percent of the US population are not just in debt they’re literally dying in debt. Millions of families are grappling with the reality of living on the margins of financial freedom. Whether it’s related to wage stagnation, underemployment, college or consumer debt—or simply living beyond their means—many are falling through the financial cracks and are not entirely sure what to make of their debt situation or how to recognize the indicators that could lead to personal financial crisis. Here are 10 warning signs that you may have a debt problem.
1) Receiving frequent bank overdraft notices.
One obvious warning sign that you have a debt problem is receiving frequent overdraft notices from your bank about your account or accounts being overdrawn. You may even be afraid to “check” the balance in your check-ing account (pun intended). This is a telling sign that you’re not in a good place financially.
2) You have difficulty meeting your personal financial obligations.
Another sign that you may have a debt problem is if you’re always playing catch up. Regardless of the extra hours you put in at work or the extra money earned at a second job, it never seems to be enough to cover your obligations. You’re constantly juggling your financial responsibilities and hoping that the juggling act doesn’t become a circus.
3) You are always borrowing.
Whether it’s from friends, associates or even your retirement account, nothing screams, “I’m having financial difficulty,” than the constant need to borrow. It is another sign that you may have a debt problem.
4) You are unable to save.
Not being able to save even a small sum of your income, whether it’s for emergencies or longer term financial goals, such as retirement is a definite sign that you could have a debt problem.
5) Your payments are occasionally late.
Because of your financial constraints, it is often difficult to ensure that all your monthly obligations are paid on time. As a result, you may be receiving reminders, or in some cases late notices. Be proactive in taking steps to address the problem once you’ve noticed this particular pattern. Late payments can negatively impact you by costing you late fees or by hurting your credit profile. It also signals that you may have debt problem.
6) Your debt-to-income is over the top.
Your debt to income ratio is a simple calculation that measures how much debt you can carry comfortably based on your gross income. It is a simplified way lenders determine if credit applicants are financially able to take on more debt. The magic number is usually around 36% or less. If you’re in the 40 percentile and above, you’re carrying too much debt compared to your income.
7) You’re not sure exactly how much debt you have.
This may sound a bid outlandish, but if you’re not consistently budgeting and haven’t taken the time to review your overall financial picture—by assessing your income, expenses, assets and liabilities—you have no way of knowing exactly what type of debt situation you’re in. It may also mean that you also won’t know where to begin addressing it. You’re making a huge mistake if you’re not sure who you owe and how much you owe. Given that you could be in financial purgatory, it really makes sense to be as specific as possible about your debt problem before it gets any worse.
8) Your credit cards are maxed out.
If you’re short on cash and credit is the only way you can consume goods and services or pay bills, you have a debt problem. It is also likely you’ll see your credit card balances increase from month to month. Maxed out credit cards also mean that you’ll be paying much more for what you’ve purchased as credit cards interest rates may kick up; particularly when you carry monthly balances.
9) You are constantly thinking about filing bankruptcy.
The stress of being unable to meet your personal and financial obligations can be daunting. The pressures can lead to consequential decisions that may impact you for a very long time. Bankruptcy is one such decision. There are other viable alternatives, however, such as talking to an accredited credit counselor. Any thought about the bankruptcy should be explored as a last resort and certainly discussed with the appropriate legal counsel.
10) Talking about your financial situation is difficult.
You tend to get uncomfortable, embarrassed or perhaps even irritated whenever the conversation enters your financial space. The hyper sensitivity to discussing your financial picture spells that you have a debt problem.