Debt is a natural part of the United States financial system. Every individual’s credit score is important for it determines whether one is eligible for loans, and it also has the power to influence the rates that a person pays for. It’s just the nature of the beast—and debt is not something we can avoid altogether.
There comes a point, however, when debt is more of a noose hanging over our heads instead of something that benefits us. When our debt becomes debilitating, that’s when we need to do something. In fact, we don’t have to wait until we are drowning in debt before we take control of our financial life.
Here are some signs your debt is overwhelming you:
- You keep borrowing from different places to be able to pay for your existing debt
- Your savings are nowhere to be found
- Your debt-to-income ratio continues to plummet
- You feel stressed, helpless, and depressed over your current financial situation
- You’re having a hard time acknowledging the reality of the situation
- Debtors keep knocking at your door or calling you
If you want to avoid getting to a point where your debt is out of control, and if you want to avoid experiences such as wage garnishments or having to file for bankruptcy, you need to get your debt under control before it’s too late. Here are some pointers you need to remember.
Don’t buy anything you can’t afford without a credit card
The 2007-2008 financial crisis happened in part because people who had a poor credit history or didn’t have one at all were able to realize their dreams of becoming homeowners. It resulted in people not being able to pay back their mortgages, which snowballed into the Great Recession.
While we can blame the entire system for the fallout, we also cannot underestimate the power of personal responsibility. We as individuals need to be smarter about how we use our credit cards or how we borrow money, especially at a time when companies and brands have mastered the art of marketing. We need to be savvy about how we use our credit cards, and that includes not buying something if we can’t afford it without borrowing money for it.
Don’t buy something if the only way you’ll be able to pay for it is through a credit card.
Always pay your balances in full
It sounds like obvious advice, but you’d be surprised by how many people don’t pay off their credit card balances in full. A 2018 survey found that 65 percent of people could not pay their bills on time because they didn’t have money. The study also found that those surveyed were thin on money, and they had to stretch whatever they had to pay for their essentials and other debts on top of their existing credit card debt.
This is why we avoid using our credit cards on non-emergency and non-essential items: It’s because we add to our future problems when we are flippant about borrowing. To keep your debt under control, make sure to pay for all the balances you have now, instead of letting it go on and snowballing into an unmanageable amount.
Establish a budget and keep a master sheet of all your expenses
There was a hit tweet that asked, “Has anyone else made it to their thirties without ever having an official budget, just checking your bank account a lot + vibes?” It’s a funny tweet, to be sure, and no doubt there are people who manage to do just fine without a budget. But if you are someone who has a problem with overspending or not being able to keep track of your expenses, then having some form of structure in this area of your life is necessary.
Budget your monthly expenses according to your needs. There are plenty of online tools and apps that can assist you with this if it’s not your strong suit. And once you have an established budget for the foreseeable future, consider setting up a master sheet of all your expenses so you know where your money goes regularly. If a spreadsheet sounds bothersome, there are plenty of apps that can help keep track of your expenses for you too.
Keeping your debt in order now is one of the best things you can do for your future self. Follow these basic but necessary pointers to ensure that you keep your debt under control, and you never have to worry about dealing with debilitating debt in the future. You can do it.