Debt Denial: How to Know When Too Much Is Too Much

Have you ever found yourself in an uncomfortable situation and wondered why you didn’t see it coming? Often the warning signs are all there, we just miss them.

Here’s how to know when too much is too much when it comes to debt denial.

Lack of Emergency Savings

Most financial experts will tell you to accrue between three and six months of living expenses in savings. If your obligations run $2000 monthly, this means you should have at least $6,000 in savings and ideally $12,000. Granted, if things got really tight, you’d cut back on spending (ideally), but with a cushion like this in place, going into debt in an emergency situation is less likely.

Payday Loans Integral to Managing Bills

One of the highest interest rate obligations you can take on, payday loans are designed specifically to target underfunded people. While these short-term loans might not look particularly expensive, when you factor them out, you’ll find the effective annual interest rate is usually close to 400 percent. If payday loans look like an effective option to you, you’re already in trouble.

Minimum Monthly Payments Are Barely Affordable

Credit card companies calculate minimum monthly payments specifically to maximize their profit potential. In an ideal world, you’d pay each of your credit card balances in full each month. Failing that, you should at least try to maximize the amount you pay each month to clear up the debt as quickly as possible. The longer it runs, the more you’ll pay.

The Lottery Is Your Retirement Plan

Before you laugh, know this is a very real thing for a lot of people. In a world where $2 can become $20,000,000 a lot of people are willing to take the chance. However, if you save $2 a day every day for 30 years, you’ll have $21,900—before the accrued interest is calculated. Or, an additional $60 a month you can use to eradicate your debts. A much better move is to get your spending in check so you can save, rather than chasing pie in the sky.

Paying Visa with MasterCard

Visa will be happy for a while. MasterCard will too—until you hit the limit on both accounts. Then you’ll have to find another way to pay and if none is forthcoming you’ll be in for a world of collection calls, email and letters. Similarly, if your situation finds you having buying groceries, gasoline and other day-to-day items with credit cards, you’re about to have some significant financial issues.

Borrowing from Friends and Family

One school of thought says if you have to borrow money to buy something, you shouldn’t have it. Another old adage advises people to never lend what they can’t afford to give. Basically, what these two bits of wisdom boil down to is if you’re asking friends for money to get you to the end of the month, you really need to stop and check yourself. Things have gotten out of control.

If It’s Already Too Late

If you see yourself in any of the above scenarios and can’t turn it around, you’re going to need professional help. This might take the form of credit counseling or debt settlement. Either way, you’ll need to be careful when you choose a company with which to work because there are a lot of scammers and misinformation out there, like these Freedom Debt Relief lies; when, in truth, the company is reputable and has been assisting folks for years.

The good news is if you catch it early enough, you can sometimes turn things around simply by adjusting your spending habits. But to avoid debt denial you have to pay attention and learn how to know when too much is too much.