Rising Debt: Here’s When to Worry

Carrying debt is not automatically a bad thing. For example, putting some purchases on your credit card allows you to buy big-ticket items and pay them back over time. It also helps you build your credit score, which makes life much easier when the time comes to apply for a home or auto loan. This explains in part why the average U.S. household with credit card debt carries more than $16,000.

But the average household with credit card debt also pays an average of $1,292 in interest yearly. This is one reason that debt can be a slippery slope: Borrowing money always comes with an associated cost. Falling behind on payments further exacerbates the cycle, making it even harder to pay back debts because there’s interest tacked onto the principal amount owed.

So, when should you start to worry about your rising debt? Keep reading to learn more about some tell-tale signs, plus potential solutions to alleviate your debt and get you back on the right financial track.

Signs Your Debt Is Out of Control

Everyone’s relationship to debt is different depending on factors like income, type of debt, etc. But there are a few universal signs that your debt may be controlling you rather than the other way around.

You have no concrete plans for repayment. Having a specific payoff date “forces you to devote your time and resources to meet a deadline.” Continually pushing off repayment to a hypothetical future date allows you to build up more debt and stay in denial longer. Lacking a repayment plan also indicates that you might not have the funds to tackle your debts, which is always a dangerous financial state.

You have to choose between saving and paying off debt. Rerouting the money, you would usually save to repaying debts is a huge red flag. This means you’re not building up your savings account or emergency fund, so you’ll just plummet into more debt if an unexpected expense arises. The typical rule of thumb is that 20 percent of your paycheck should go into savings. If your debt is disrupting these deposits, it’s time to address your debt. 

Debt is starting to affect your psychological state. Debt can trigger powerful psychological reactions, including anxiety and denial. Some people find themselves lying awake at night wondering how exactly they’re going to pay the bills. Others hide their financial reality from families and friends, creating barriers in personal relationships. If debt is starting to trigger psychological duress, the only thing that will help is coming up with a realistic solution to minimize and eliminate your outstanding balances.

Getting Out of Debt

Some people can tackle debt on their own, pinching pennies to pay down their balances over time. However, people facing more significant debt loads can benefit from reaching out for help.

One potential solution for consumers with credit card debt is debt settlement because this process can reduce the actual amount of debt you owe, making repayment more manageable. But before you sign any agreements, conduct plenty of research on debt settlement reviews. See what other consumers and sources have to say about various companies with queries like Freedom Debt Relief reviews. A reputable partner can help you on your journey to achieving debt relief; a scam will only hold you back and waste your resources.

Staying Out of Debt

The final piece of the puzzle is making sure your debt does not rise to dangerous levels again. This entails modifying your spending habits and keeping close tabs on various debts. The best way to avoid racking up credit card debt is by paying your balance in full each month. This way, you charge less and avoid scraping by on minimum payments.

The first step is knowing when your rising debt is getting out of control. Then you can act.