Debt Problems

We get so used to juggling all our debts that before long the feeling of ‘being constantly behind’ with our bills is the norm. Excessive debt should not be taken lightly. So how do you know when you are carrying too much debt?

The following are some signs that you may be carrying too much debt:

• Constantly thinking about money and bills. Juggling different payments. Borrowing from one source to pay another are all signs that you are in financial trouble.
• Feeling anxious about your financial situation, stressed and always tired.
• Difficult sleeping at night.
• Avoiding telephone calls.
• Consistently missing or being late with your payments.
• Loan repayments, excluding your mortgage, are taking up more than 20 percent of your monthly disposable income.

Working out your debt to income ratio will give you a clear indication of just how much debt is too much debt. All you need to do is divide your monthly debt payments by your gross monthly income. If your debt burden is greater than 30 percent you will be experiencing some discomfort. If it is greater than 40 percent of your gross income you will need to take urgent action to remedy your situation.

Payments to take into account when calculating your debt to income ratio include: monthly credit card payments, car loan repayments, your mortgage, any ongoing payments such as rent, investment loan payments and your living expenses.

If you are experiencing financial stress you may benefit from debt counselling or financial counselling. Various independent and Government bodies can help and there are also debt counselling businesses that can help you consolidate your loans, develop a debt agreement with your creditors and a strategy for a debt-free future.

Avoidance is not the answer. Taking positive steps to improve your situation will help to protect your credit rating and reputation with creditors. If you ever hope to start a business or plan to buy a home of your own then this is a very important consideration.




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