Signs your debt is getting out of control.
You may already suspect you are in over your head financially. That little voice is telling you that maybe things are getting out of hand, but you shut it up by buying it a little treat. There are a few signs & signals that your debt is getting to the point where it is unmanageable & may be causing significant damage to not only your financial well-being, but your relationships as well. If any of these statements apply to you, it’s time to get some help:
I can only afford minimum payments
I have stopped contributing to savings
I often pay bills late
My credit cards are nearly maxed out
I am avoiding knowing my total debt amount
I hide purchases from my partner / friends / family
For those of you that need a marker that is a little more concrete, your debt to income ratio should be 36% or less. To keep the math simple, if you made $10,000 a month pre tax, the max you should be paying towards debt is $3,600.
Once you have established that you need some help, where do you turn? Depending on your situation, there are several options that can help you pay down, consolidate, or even eliminate your debt.
Debt Settlement- A for profit agency or law firm negotiates on your behalf for a reduced payment in lieu of the full amount owed. There are lots of nuances here, so please make sure you are working with a reputable organization & fully understand the legal and tax implications of this process. Go to linktr.ee/missoulabookkeeper for our podcast with Marie Megge, a professional debt negotiator.
Debt Management- This is a third-party agency that negotiates on your behalf to set up a repayment plan. You make a payment directly to the agency & they pay the creditor. You should only work with a licensed agency.
Personal Finance Counselor-A CPFC assists in the development of a budget, evaluating your debt, setting financial goals & developing a plan of action for your overall financial health. (Stay tuned for more on this in the next couple months!)
This may all be a hard pill to swallow, so if you’ve made it this far, I’m really proud of you. You may be feeling overwhelmed and a little embarrassed about the amount of debt you currently have, but admitting there is a problem and facing it is the first step to freedom!
