Being in debt is relatively normal, but there comes a point when it becomes too much of a burden for your daily finances to survive. Thankfully, there are a few simple ways to find out if you’re in over your head. By looking at your debt-to-income ratio, evaluating your current budget, and analyzing your stress level, you can determine whether you have too much debt or not. Take time to look over your finances and debts and you can decide if help is needed to get you back on track.
For individuals that prefer statistics, and cold, hard facts, this can be very helpful. To figure out your debt-to-income ratio, add up all of your monthly debt payments. Use the minimum payment, and don’t include your mortgage. According to Abakhan & Associates Inc., this sum shouldn’t be over 20 percent of your total monthly income. Get your finances under control by focusing on one debt at a time. Once you have one payment taken care of, use the money that was going for it to focus an another debt. You’ll be financially fit in no time at all.
Are you lacking in anything? If you find yourself buying ramen to stretch your grocery budget, you may have a problem (unless you just like ramen). You should be able to pay for housing, heat, electricity, food, and other essentials without worrying about where the money is coming from. If you’re having trouble making ends meet because of debt, it would be smart to talk to a professional. It’s better to get a bankruptcy, than it is to go without necessities. If possible, see if you can fill your needs before putting money towards debt. This can help put your finances in perspective and give you a chance to see if you can’t afford your debt. Everyone needs help every once and a while, so don’t feel bad about using the options that are available to you.
When it comes right down to it, your stress level is the most important indicator of your debt situation. It doesn’t matter if you have a debt-to-income ratio of 50 percent, or 5 percent – if you’re having trouble falling asleep at night because you’re worrying about how you’ll pay back what you owe, something needs to change. Don’t be afraid to call your creditors to ask for a lower monthly payment. If that doesn’t work, talk to someone at your bank or credit union about consolidating everything into one payment with a consumer proposal from Britain Columbia and it will be easier to pay your bills, and you could end up paying less each month. You might be surprised how asking for a discount or lower payment can really help you. When you open communication with your creditors you show them your initiative and honesty, and with their help you can come to a good agreement.
Figuring out your debt situation is personal. What counts as too much debt for you might not for another person. Start out by crunching numbers and evaluating your quality of life, but don’t forget about your feelings, either. When you know your limits and where you can turn for help, your debt can go from a living nightmare to a more manageable reality. The more you know about your own personal finances, the more you are able to understand how to get a handle on your debts.