9 Signs Debt Is Taking Over Your Life
Feeling like you have little money left after after paying bills? Well, you are not alone. This has become an increasing problem for many since COVID hit. According to a recent survey, 63% of Americans say they’re living paycheck to paycheck since the COVID-19 pandemic hit. According to the same survey by Highland Solutions, 42% of Americans have taken on more debt than they normally would. Debt for many isn’t going away so we’ve gathered a few indicators that can help you determine if it’s taking over your life.
Is Debt Taking Over Your Life? Here Are 9 Signs That Could Validate This.
- You’re finding it difficult to make your minimum monthly payments
If you are having a hard time scraping together enough money to pay the minimum amount due across your accounts, it could be an indication that your debt is out of control. Keep in mind, only making the minimum monthly payments will result in more interest paid over time. This will also result in you remaining in debt for longer
- You can’t keep track of who you owe
Do you have too many people you owe money to? Keeping track of all your debt accounts can be quite the task. If you are finding it hard to keep your debt accounts straight, it may be a good idea to consider consolidating all of your debt into one personal loan. This idea will be covered in-depth later.
- Your debt grows each month
Does it seem like every time you get your bill, the amount you owe increases? If your debt seems to increase every month, getting out of debt may seem like an impossible task.
- You start missing payments
If you start to skip out on paying certain bills every month, it is a good indication that your debt has gotten out of control. Not paying your bills on time, every time can have a negative impact on your credit score, which could result in being denied for financing in the future. In addition, paying your bill late may result in a late fee, which only adds to your debt.
- Your debt keeps you up at night/you feel hopeless
If your debt is keeping you up at night, or if you are feeling hopeless when it comes to getting out of debt, it’s a good indication that it has taken over your life. If you are unable to clear your mind of your debt, it is time to make a positive change so you can worry less about your finances, and focus more on the things that make you happy.
- You have stopped saving
Most experts will advise to have at least six months of savings available to you in an emergency fund, however; 56% of working American say they are only able to save $100 or less each month. Not having an emergency fund available to you in the face of an unexpected event could put you in a stressful and financially troubling situation. While there are some months you may not be able to save much from your paycheck, if you consistently are unable to save, it’s time to reevaluate your debt and create a plan to get out.
- Debt collectors are calling
Have you started to get those annoying calls from debt collectors? If you answered yes to this question, it is time to formulate a plan to reduce your debt. Not doing so could not only put more strain on your finances, but it could also cause your credit score to plummet.
- You have to borrow money to pay your bills
If you find yourself borrowing money to pay your bills, raise a red flag. You should not take on more debt to pay off your current debt.
- Your credit score has suffered
Not paying your bills and incurring too much debt is detrimental to your credit score. Your credit score is a major factor financial institutions use in order to determine your creditworthiness. Having a poor score can drastically decrease your chances of getting approved for financing, and could affect other aspects of your life, such as your ability to get a certain job, rent a car, or move into an apartment. If your credit score has taken a plunge since you took on debt, it’s time to make a positive change.
Top Reasons You Can’t Get Out Of Debt
- You Keep Spending On Credit. It doesn’t make sense to keep adding onto the debt that you are trying to pay off. Next time you go shopping, leave your credit card at home, consider freezing it, or even lock it away so you won’t be tempted to use it. If you have to, cut the card up for the time being, and have a new card reissued once you have been able to pay down your debt.
- Opening Retail Store Credit Cards & Using Them. Just about any retail store you go into now has their own credit card that they want you to apply for. Many times the interest rates on these credit cards are insane. Resist the temptation to open new retail credit cards, and charge your purchases on them. If you carry a balance on these cards, you will likely be paying a ton of money in interest, not to mention adding onto your debt.
- Only Paying The Minimum. Only paying the minimum balance is not enough to get you out of debt at a fast rate. The longer you take to pay off your debt, the more interest you will pay. For example, let’s say Sally has a $5,000 balance on one of her retail store cards, with an interest rate of 12% APR, and she only makes the minimum monthly payment of $100. In this situation, it will take Sally 70 months to pay the card off in full. By the time everything is said and done, she will have paid an additional $1,966 in interest, making that original $5,000 balance $6,966 in the end. This example illustrates how much interest can build up, and how long it could take someone to pay off debt if he or she is only making the minimum payments every month.
- Spending More Than You Bring In. One of the biggest reasons for people falling into debt is spending more money that they bring in. Make sure that you are not spending more than you bring in monthly. This habit will surely increase your outstanding debt. Instead, focus on paying off your current debt, not adding onto it.
- Leaving Balances On High-Rate Cards. If you have large outstanding balances on high-rate credit cards, consider paying these balances off first. If you find that your outstanding balances are simply too high, consider speaking with a Launch CU loan specialist about applying for a personal loan to help consolidate your debt, or consider a balance transfer to a credit card with a lower interest rate. Personal loans often have much lower interest rates than credit cards, and have a set term in which you have to pay back the loan.
- No Plan To Get Out. Perhaps the top reason that you cannot seem to get out of debt is because you simply do not have a plan to help you achieve this. It’s nearly impossible to make strides towards reducing your debt if you don’t have a plan of action in place. Start by making a budget including all of your financial obligations. This should help you determine how much you will be able to put towards your debt every month. Launch CU also offers a variety of financial resources to help you manage your money such as Debt In Focus, Fritter Finder, Money Management Planner, and more.
5 Tips To Get Out Of Debt
While your debt may seem like a dark shadow that will never go away, we are here to tell you that it is possible to overcome your debt, and live a more stress-free life. Here is a list of five things that could help you reduce your debt, so you can experience more financial freedom in 2021.
- Stay away from companies that promise to clear your debt quickly
A simple Google search will return thousands of results for companies that promise to rid you of your debt quickly. Be very wary of companies that make promises to make your debt disappear overnight. Getting rid of debt is a marathon, not a sprint. It requires patience, guidance, and a plan. Getting out of debt is not impossible, but getting out of debt overnight is.
- Cut excess spending
If you are serious about wiping out your debt, you need to cut all excess spending. This may require you to make sacrifices in your personal and social lives. Getting yourself out of debt may put a hindrance on your social life, but in the end, being debt-free will lead to less stress and a higher quality of life.
- Consolidate your debt with a personal loan
If you have many debt accounts, it may be hard to keep track of who and how much you owe. In addition, owing multiple companies can result in paying interest on all of your accounts, if you are unable to pay the balance off in full. One option that may be able to help you avoid this is to apply for a personal loan. A personal loan could help you consolidate all or the majority of your debt accounts into one loan, which will make paying off your debt easier. In addition, a personal loan could help you avoid paying interest across multiple accounts, making it cheaper to pay off your debt. Lastly, since personal loan rates are typically lower than credit card rates, you could save a lot of money in interest charges.
- Consolidate your credit card debt with a balance transfer credit card
If you have a high-rate credit card that you carry a balance on, you may be shocked to know what your interest rate is. Big bank and retail credit cards often times charge interest rates of over 25%, which can make paying off your debt a difficult task. Next time you get your credit card statement, check your interest rate. If you see upwards of 20%, consider applying for a low-rate Launch CU credit card.
- Consider a side hustle
If you have some spare time, it may make sense to pick up a side job to help you pay off your debt faster. A few ideas to get you started include becoming a freelancer on UpWork, sell your custom art on Etsy, or sell unwanted items you have laying around the house.
Final Word On How To Get Out Of Debt
Debt doesn’t have to be a never-ending downward spiral. There is a way out. You can get out of debt, you just need to make smart decisions based upon your current financial situation. Most importantly, if you have large amounts of credit card debt, stop spending on credit, and focus on paying off your outstanding balances. Also, check out our previous blog post for more tips on how to get out of debt. Remember, you are not alone in your debt. Launch CU is here to help in any way that we can. Our goal is to help you go beyond to reach your financial and life goals.