In my work as an independent financial advisor I hear this question frequently: “How much debt should I have?” It doesn’t matter how much income you earn – it’s always possible to have too much debt. We are a consumer society in which anyone, regardless of income level, can overspend. The problem is that having too much debt can lead to other financial issues.
If you are concerned about your debt level but aren't sure if it is out of control, here are some signs that should trigger alarms:
You can’t pay bills on time.
Are you making late payments and juggling which bills to pay because you don’t have the money to cover all your debt payments? If this is the case, you definitely have too much debt. Your late payments earn higher interest charges and penalties, which only increase your debt problems and lower your credit rating. It’s time to review your monthly spending and look for ways to cut back. Financial belt-tightening is in order.
Your savings are gone.
Do you no longer have
You're paying bills with borrowed money.
Whether it’s personal loans from family and friends or from institutions, if you have to borrow money to pay your bills, you have a debt problem. Think ahead to how you will ever pay off these loans and, even worse, that you will eventually need more.
Your credit cards are buying groceries.
When the only way you can buy necessities such groceries is with a credit card, it’s a sign that you can’t support your lifestyle. Lots of people shop with credit cards – and can afford to pay them off each month. You can’t. It’s time to learn how to budget and figure out how to live on your income.
You’re not sure how much you owe.
Your uncertainty is the loudest alarm of all. If you are avoiding the reality of your debt, it will only get worse. It’s time to confront your financial situation and get help. A financial advisor will help you develop a realistic budget that is compatible with your current income, and work with you to find strategies to reduce your debt. You need to regain control of your money to put more of it to work pursuing your financial goals.
Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.