Overwhelmed by Debt? 5 Warning Signs to Watch For

Debt is a double-edged sword. When utilized correctly, it can improve our financial life but when we lose control of it, too much of it can lead to financial ruin. Some debt like education loan or home loan is useful and constructive, but we must always ensure that the total debt we take on is within our financial means.

So how much is too much debt? The amount of reasonable debt varies for individuals and depends on various factors such as spending and saving habits, financial obligations and stage of life.

Here are some warning signs of excess debt to watch out for and a few tips on managing these situations so that your debt does not spiral out of control.

1. You cannot pay your bills on time

If it’s becoming difficult to pay your bills on time or the monthly loan payments are adding up to a sizable percentage of your income, your debt might be more than you can manage.

Action: Start tracking your expenditure. Spend only on essentials and save as much as possible. Connect with your creditors and billers to revise your payment plan.

2. You pay only the minimum amount due on your credit card bills

If you are only managing to pay the minimum amount due on your credit cards each month, you may not only be carrying too much debt but also adding to it.

Action: Pay off your credit card dues as much as possible. Don’t keep more than 1-2 credit cards and cancel the others to reduce the temptation to spend.

3. You are borrowing money to pay off creditors and bills

This is dangerous as you are unable to handle current expenses and are burdening yourself with more loans and interest payments.

Action: Reduce your bills and cut back on unnecessary expenses. You may have to look for additional sources of income.

4. You have started lying about your finances

When you find yourself lying to family or friends about your spending habits and debt, it is time to take serious action on your personal finances.

Action: Create and stick to a realistic budget. You can also take help of a financial planner to devise a plan of action to manage your finances better.

5. Financial stress is affecting other aspects of your life

Lack of sleep and being distracted at work due to financial stress are certain signs that debt is taking a toll on your life. You must take urgent measures to tackle it.

Action: Be more responsible financially. Seek professional help. Set up goals for better financial habits and take concrete steps to achieve them.

Once you acknowledge these warning signs and face your money problems bravely, you can turn around your finances. The sooner you act to get your debt under control, the quicker you make a positive difference to your finances. A smarter way to spend on our aspirations is to save first with a target and then spend later. There are several mutual fund solutions that can come handy depending on time in your hand to achieve a goal and to bring discipline into your monthly savings.

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