Debt has a way of creeping up on you before you even know it. You add more to your credit card balance than you pay off each month. You put off paying your phone bill for a few days past the deadline to get to payday. You use your line of credit to cover an emergency expense.
Over time, you get used to it, and you don’t even notice just how dangerous the situation has become.
These are the top warning signs that you’re in financial danger. If you recognize any of these in your life, it’s time to take action to resolve debt issues and get back on track.
#1 You’ve Spent Your Savings
Dipping into your savings to avoid going into debt isn’t necessarily a bad idea. The cost of paying interest is an ongoing expense that can hamper your long-term saving goals.
However, draining all of your savings to pay back debt can leave you in a very vulnerable position. An emergency savings fund protects you from tumbling back down into debt. You could be one car breakdown away from going over the edge.
Even worse is if you start tapping into retirement savings, which need time to grow and accumulate compound interest.
#2 You Can’t Sleep
Do you go to bed at night thinking about your bills and wondering how you’re going to pay them? Your mental and physical health will suffer when you’re under financial stress, and that can impact your home life, work performance, and sleep schedule.
If debt is something that keeps you up at night, it’s time to look for a debt relief solution.
#3 You’re Borrowing Money to Pay Back Other Debts
Anytime you find yourself borrowing money to keep up with bills, you should start thinking about credit counselling or another debt solution. When you turn to friends or family, you put a strain on your relationships, and you’ll eventually run out of places to turn.
#4 You’re Using Cash Advances on Credit Cards
Cash advances are another way to borrow money to pay other debts. If you have one overdue payment on a credit card, you might be tempted to take a cash advance from another one. But this is one of the most expensive ways to borrow money.
Cash advance fees take a flat rate or even a percentage, usually ranging from 2 to 5 percent, and they come with higher interest rates than your usual APR. It’s a fast way to wind up in even worse debt
#5 You’re Making Payments Late or Not at All
Late payments can quickly turn into a credit nightmare. They impact your credit score and, if you ignore them for long enough, they can land your debts in collection. That’s when you start getting collection calls and even judgements against you that can let your creditors garnish your wages or freeze your bank accounts.
These are all signs that it’s time for you to take serious action with your debt.