Are You in Debt?
by Gail Cunningham, Media Relations, National Foundation for Credit Counseling (NFCC)
People often ask me how they can tell if they’re in debt. My standard answer is, “If it feels like it, you probably are.” Simply posing the question proves that you’re concerned.
Debt is a dark cloud that follows you around. It’s there when you wake up in the night. It’s with you at work. It makes you fearful to answer the phone, worrying that it might be a bill collector on the other end of the line. You’re afraid to go to the mailbox. You’re not as good a spouse, parent, or employee when debt issues are occupying your thoughts.
Take a deep breath, swallow hard, and then honestly answer the questions below:
- Do you argue about money at home? Court records show that financial problems are a leading cause of divorce.
- Do you hide purchases so that your spouse doesn’t know about them? That’s called financial infidelity.
- Do you have savings? Many people have a savings account. Some even make deposits into it. But, they pull the money right back out. When you’re living without a savings account, you are flying without a safety net.
- Do you charge things that you used to pay cash for, even the smallest purchases? This signals that you don’t have the ability to pay cash.
- Do you make only the minimum payment each month on your credit cards? Even worse, do you think that you’re financially stable for having done so? If so, you’re the credit card company’s dream customer, as they’re making a nice profit off of you each month.
- Do you rob Peter to pay Paul? “Can I pay my Visa with my Master Card?” is only funny on a bumper sticker.
- Do you use balance transfers to obtain a lower interest rate, and since the rate is so low, continue charging? Moving money around isn’t the same as becoming debt free.
- Do you open new lines of credit when you’re near the credit limit on existing cards? This signals that you’re living off of credit, and the last thing you need is another card.
- Do you skip payments or pay your bills late each month? If so, you’re throwing good money out the window. Late fees and interest only add to your balance. Get organized, move your due dates, set up automatic bill paying, do whatever it takes to pay on time every time.
If you answered “yes” to any of the above questions, it’s time to take an honest look at your financial situation. Do so today, as there is nothing to be gained by delaying.
- The place to start is by seeing what you owe in black and white. Whether you stare at these financial facts on a tablet or on a computer screen isn’t important, but it is critical that you force yourself into owning up to the amount of debt you’re carrying and what it is costing you in interest and fees each month.
- Next, vow to do something about it. A willingness to change and a commitment to follow through is critical to the success of your plan.
- Since every penny counts, you need to know where every penny is spent. Start tracking your spending. Recording the big-ticket items like rent and car payments is easy. It’s the little money that is unaccounted for that wrecks budgets. Have everyone in the household who spends money commit to writing down every purchase – including the small ones – every day for a month. Knowledge is power, and now that you know where your money is going, you’ll have the power to change the flow to better reflect how you want it spent.
- Even if it means starting small, commit to save. Little money becomes big money. No more excuses. Have everyone in your household save $1 per day this month. Next month see if you can save $2 per day. A year from now you’ll be in a much better position to survive the inevitable unplanned expenses that life brings.
- When you’re in a financial hole, stop digging. Stop charging and start paying with cash or a debit card. When you run out of money, stop spending. Yes, you can do this. It may not feel like it, but you can. And if you can’t, you’re in worse shape than you thought.
The bottom line is that you can’t solve a problem without facing the problem. Knowing how much you owe and how you spend your money is the place to start. For help creating a budget and finding hidden money to put toward saving, reach out to an NFCC certified professional. To be automatically connected to the NFCC member agency closest to you, dial (800) 388-2227, or to find an agency online, visit www.NFCC.org.