This is a fab guest post from Sara Williams, who blogs at Debt Camel about everything to do with debt, from getting a payday loan refund to improving your credit record before a mortgage application.
In this post she will guide you through the 8 symptoms to look out for that suggest you have a debt problem. She also has some great tips for what to do if you think you have debt-itis!
When my debt was getting out of control, I certainly had a good majority of these symptoms. Thankfully I didn’t let things go so far that I couldn’t get myself out of the problem. It’s essential to spot the signs quickly so you can get on top of the debt problem fast!
There’s no judgement, blame or shame here.
When Does Debt Become A Major Problem?
Most adults in Britain have some debt. But when does your financial situation move into the danger zone, where debts and bills are not just annoying, but you need help with them?
This is like wondering when to go to the doctor with a cough – the appointment may be inconvenient, it’s probably just the end of a cold so antibiotics won’t help… but it seems to be getting worse not better…
So to help you make your decision about where you are on the scale of debt and how big a problem it is, here are the symptoms of debt problems to look out for:
You can only pay the minimums to your credit cards
For a short while this doesn’t matter. And if the card is at 0%, it’s a great time to pay off more expensive debt!
But if you don’t think you will ever be able to pay more, that is a warning sign of problems ahead.
You spend most or all of the month in your overdraft
Overdrafts are great for the unexpected problem, but they are very expensive. If this is the only symptom that you have, try to get it down bit by bit each month. When you have other problems from this list as well, it is a red flag that things may be getting out of control.
You don’t want to open bills and credit card statements
No-one enjoys paying bills or interest, but if you find yourself putting off opening envelopes or emails because the thought makes you feel queasy, that isn’t good.
And if it moves over into you worrying about bills all the time it can start to affect your sleep or mental health. You don’t want to end up with a medical problem as well as a money problem.
Using a credit card for food, petrol and bills
If you have a cashback card or one with loyalty points, using it for everything may feel sensible. But that is only right if you pay the card in full every month! If you use the card because it’s easy, have a look and see if your balance is going up most months.
And if you are using the card for essentials which you can’t pay for in cash because of other debt payments, the old saying “Robbing Peter to pay Paul” applies. Unless you can stop this, your money problems will get worse every month as you borrow more and get charged more interest.
Your partner doesn’t realise things are getting worse
Again this is a matter of scale. Lots of couples don’t share every detail of their finances. But improving your finances may need you and your partner to spend less on some things and it’s hard to start that conversation if you are keeping quiet about the reason.
You have expensive “bad credit” debt
Debt becomes more expensive the more you have. First you get turned down for the best deals, then you can’t consolidate cheaply. Next you can only borrow from really expensive bad credit lenders – long term loans at 30% or more, payday loans etc.
If you are just at the point where the cheap options have gone, step back and get some advice. And never drag your family into the mess by looking at guarantor loans – they are a trap you will regret.
Can’t make the minimum payments
If you are already at the point where you can’t make the monthly repayments don’t be an ostrich. It’s better to talk to the creditor and make a payment arrangement or talk to a debt advisor about what your options are.
You have rent, mortgage or council tax arrears
With any of these you need help right away. The only exception is if you are 100% sure it’s a very temporary problem – perhaps you are starting a well-paid job in the next month…. But don’t kid yourself.
Council Tax arrears feel less serious, but councils are faster to go to court and to send in the bailiffs than any other sort of creditor, so a small problem can quickly have hundreds of pounds added in charges.
What Can I do?
If you’re managing ok, but know you need to do something to prevent a major disaster, the first thing is to try not using your credit cards for a couple of months and break the cycle of reliance on them.
If that feels unrealistic in December, start it in January! This means leaving the cards at home and not buying anything online using the cards.
If you can manage this, then with some determination you will probably fine. You could join Nikki in her Supermarket Challenge to Reduce Your Food Spend and Cut Out Waste. Look at other ways to trim your costs and start paying more than the minimums to those cards. You could also try downloading her checklist for where to find savings within your monthly bills to free up cash to put towards debt.
The other thing that is really important is to increase the gap between your income and your spending. You might need to come up with some creative ways to bring in some extra debt-busting cash!
As your debt drops you may be able to speed it up by looking for 0% deals.
If you can’t manage with the credit card though, your debts are probably going up every month. The sooner you take action the better as it gets more difficult the larger your debts are.
It’s good to talk
With that cough that is getting worse, your friends and family will probably start saying you should go to the doctor. But in Britain we don’t talk about money much, let alone debts. So debt can feel something to be ashamed of.
Talking to a debt adviser can come as a huge relief. They aren’t judgemental, you won’t be criticised. A debt adviser can talk through your options and the pros and cons of each – it’s up to you to decide which will work best for you and your family. Here is a list of good places for debt advice.
Good Luck on your journey to getting rid of your debt problem. Feel free to comment if you would like to on this post, or come over to The Female Money Doctor’s Facebook Private Group for support.
Until next time,
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