A few signs to indicate debt and associated risks

Knowing when you are in serious trouble over debts.

09:13 13 September 2013

Debts can slowly build up and overwhelm you before you know it.  It could start as a seemingly harmless personal loan or credit card overuse that could evolve and end up in resorting to the infamous payday loans.  If you notice that you have started to live in a cycle of debt payment and debt acquisition, then it could be a sign that you could already be in trouble over debts.

Check out the nasty signs of being in debt trouble.

• Credit cards could be our ally but they can also be our worst enemy.  Majority of people mired in bad debts start in incurring ballooning interest charges on their credit card utilisation.  One tell-tale sign of worsening debt condition is when you start maxing out your credit card, and then just paying the minimum required payment.  Doing this makes you pay interest charges over interest charges which can pull one further in debt.

 

• Juggling funds to choose which bill to pay first is also another nasty sign.  Prioritising bills will mean that some debts will remain unpaid till next payday and this will also incur you more interest if not diminished credit rating.

 

• If you notice that about 15% or more of your income goes to credit card debt servicing, then you should start to find ways to change your spending habits.  Consider that you there are other expenses which will require financial attention not to mention emergencies that may require unplanned but immediate payment.

 

• Oftentimes, when unpaid bills start mounting and the money coming in from the salary is no longer sufficient to pay the bills, compounded interest charges from various loans, credit card bills and allowance for basic necessities, the immediate solution is to dip into the savings or the retirement fund.  This could give temporary relief but will not be a permanent solution. 

Depleting your savings to pay off debts is not a very good financial move as it could have some negative effects on your future, specifically your retirement plan.