Are you headed for a debt disaster? You could be! The average person has $8,000 in credit card debt, but like most of life’s problems, a debt disaster doesn’t happen overnight. Here are the clear warning signs that you could be headed for trouble. We got this from Money Talks News.
- Your credit card balances are rising. Compare the balances on your credit cards from six months ago with your balances today. Are they bigger now? You should spend no more than 30% of your credit limit. So, if you have a $1,000 credit limit, that means $300. Until your balance is paid off, save your card for emergencies.
- Another sign you’re headed for debt disaster: You’re only making minimum payments on your credit cards. Experts say that if you can only afford your minimum payment, you can’t afford a credit card. That's because paying interest on purchases means you’re paying more for the things you buy. For example, say the interest rate on your credit card is 15%. If your balance is $1,000 and all you pay is your $20 monthly minimum, it’ll take you 10 years and cost you almost double to pay it off!
- Another red flag: Your savings account is empty. Money experts agree that you need savings equal to half your annual salary to ride out rough economic times, like the loss of a job or a serious illness. To get into the habit of saving: Use automatic deposit and stash 10% of your check in a savings or money market account.
- Debt disaster red flag number 4: You’re arguing about money. If you and your partner are haggling over bills more than usual, it's probably because your bills are higher than usual. So agree on a budget and a spending allowance, if necessary. Then stick to it. If money is an issue, communicate about it more often, not less often.
- Another sign you’re headed for debt disaster: You’re keeping secrets. If you’re unwilling to share your spending with your spouse, that’s a sure sign you’re afraid of trouble ahead. So come clean. Sit down with your spouse and figure out a reasonable payment plan. It may be an uncomfortable conversation, but it’s better than having to explain why bill collectors are suddenly calling.