Today, personal debt in the U.S. has spiked to record levels. In households that carry credit card debt, the average debt amount is nearly $15,000, according to a recent estimate. So, it's natural to be confused and unsure about your debt. Are you managing your debt, or is it taking control of your life? How do you know when it's time to get help? According to experts from the nonprofit Consumer Credit Counseling Service (CCCS), you can assess your own need for debt management by answering five simple questions.
1. Do I pay for normal basic monthly needs (groceries, utility bills, and gasoline) with credit cards?
If you're unable to get through the month without charging your basic expenses, you may have a debt problem. High priority expenses include your housing payments, utility expenses, food costs and medical insurance premiums. Monthly transportations expenses include your car payment, gas and car maintenance costs. These items need to be the first bills you pay. If you have to charge them, your financial footing isn't steady.
2. Am I only able to make a minimum monthly payment to my creditors?
Credit card companies do allow you to pay just a monthly minimum charge. But if you pay only the minimum rate each month, you're more apt to let your credit balance grow as time passes. And if economic times get tougher, you may not be able to repay your debt in full. That concerns credit card companies, and you'll want to be concerned, too.
3. Do I sometimes have to skip a credit card payment to make ends meet?
Not paying your bill on time may be a common mistake. But, it is a mistake. And it's an important sign, as well, that your debt has become unmanageable. Missing monthly credit card payments will incur expensive penalties: late fees, interest rate hikes and-ultimately-damaging repercussions on your credit. If you can't make a monthly payment, pay attention to what that could mean.
4. Do I receive collection calls at work or home?
If debt collection companies "have your number"-and are using it to call you-it indicates that your debt is taking center stage. Beyond the embarrassment and annoyance of their repetitive calls, they demonstrate the troubling reality that your debt has gotten the upper hand. You may need some help to rein in the situation.
5. Is my debt causing significant stress in my life?
Debt can strain your relationships, and, ultimately, affect your physical health. People in debt report serious health issues, including ulcers, severe depression and even heart attacks. Debt stress can make concentration hard and sleep difficult. Stressed people are more apt to become easily upset. If signs of stress accompany your increasing debt, get help.
Managing debt, regaining your life
A debt management program helps you regain control of your financial life. Using the assistance of a consumer credit counselor, in debt management you review your income and expenses and formulate a monthly budget that's based on your financial situation. The counselor can also negotiate with your creditors to reduce your monthly minimum payments, scale back interest charges, or even eliminate fees and penalties you've incurred. Typically, you can gradually pay off your debts with one monthly payment.
The spiral of debt can easily capture us while we're living busy lives. Once debt sucks us into its vortex, we may require help to escape its grasp. Considering these five questions can help you determine if debt is overwhelming you. If that answer is "yes," establish a debt management plan--and restore your financial wellbeing.