Do I Need Debt Help?
In a Western society we get used to juggling debt, paying bills, receiving credit card statements and borrowing money to pay for goods such as a car, fridge or a holiday. The credit cycle is not unfamiliar, and generally people can leverage credit to improve their lives, but how do you know when you are carrying too much debt? Here are the sure signs you are in too deep debt and need to take action.
Too Deep In Debt
A number of personal observations can help you assess whether you are carrying more debt than you are comfortable with. Indications include:
- constant thoughts about money, bills, payment dates, your income
- anxiety / constant tiredness
- inability to sleep at night
- feelings of hopelessness
- not collecting your mail regularly
- not responding to creditors
- missing payments or consistent late payments
- resentment of friends and family members who spend money.
There are more mathematical approaches to apply to the question of debt as well.
Debt To Income Ratio
Working out your debt to income ratio will give you a clear indication of just how much “too much debt” is for you. To work out your debt to income ratio 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. More conservative quarters say if you have a debt burden greater than 20 percent you would benefit from financial education and a revision of your affairs.
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 Government and non-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.
Although it is tempting to put your head in the sand, 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.
If you need more help managing your debt, contact DebtFix here, for a free consultation.