Addicted to Debt? 4 Warning Signs

Are you a debt addict?  Are you out of control?  Is your debt load beyond belief?  Just as the alcoholic must deal with the drink everyday, we as consumers must maintain self-control in an environment full of opportunites to buy things.  You may wonder if you are an addict.  Is it time for you to admit you have a problem?  Here are some warning signs that indicate you need to seek help.

1) No Emergency Fund.  Not having an emergency fund is a sign that you’re suffering from a lack of self-control.  Murphy will come to visit your household.  You will have unexpected expenses.  Not having an account for the the “unexpecteds” will result in increased debt when that next event happens.

2) Excessive Credit Card Debt.  How do I define “excessive?”  Excessive credit card debt is over 50% of your annual household income.  Example:  If you make 50,000 a year, anything over 25,000 is excessive.

3) Excessive Car Debt.  If your car debt is over half of your annual income, you have a problem.  Good transportation doesn’t have to come at this kind of price.  You need to consider more affordable transportation.  Payments of this type will overload your budget and place undue stress on your financial situation.

4) House Payment that exceeds 40% of your monthly budget.  Being house rich and cash poor is not a good place to be.  Having a payment at this percentage of your income puts tremendous strain on your finances.  Servicing debt this large will undoubtedly put strain on your ability to pay all the other required expenses of raising a family. 

If 2 or more of these warnings describes your financial picture, it’s time for change.  You need to downsize your life.  You can live on less.  It’s a personal decision.  If you don’t have an emergency fund, start funding one now.  You can consult some of my previous posts on advice on how to do this.


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