Some debts are good and others are bad. A student loan, for example, is an acceptable debt to have since the interest rate is most likely low, the payments can be deferred until you’re out of school and it was a loan that allowed you to get a higher education and thus a higher paying job. Credit card debt, on the other hand, is one of the worst debts you can have due to the high interest rates. You may find yourself saying “While I have some debt, it’s not that bad.” Are you sure it’s not that bad? Look at these 4 problem signs to see if you have a debt problem.
Credit Utilization Rate
Is your credit utilization rate is over 75%? Here’s how to figure it out. You take the credit limits of each of your credit cards and get a total. Then you get the total of how much you owe. Ideally, you’ll want to be only using less than half of your available credit. Any higher amount is going to hurt your credit score.
Do you and your spouse have arguments over money? While marital arguments over money are common, if these problems are serious enough that it could destroy your marriage then you have serious financial issues.
Do you have any idea how much you really owe? Do you have a clear idea about who you owe and how much? Jot down every credit card, outstanding bill and loan you owe. Along with it, write the totals and the interest rates of each one. If you’ve never done this and have no clue how much you owe, you have a debt problem.
If all you can afford to pay on your credit card debt is the minimum payment then you’re in financial trouble. The real way to get rid of your debt once and for all is to create a budget that includes a debt repayment amount. Then pay down your highest interest account first.