Struggling to keep control of personal debt appears to be a common occurrence in this day and age. Unfortunately, with the ‘I want it now’ culture that many people appear to have it embraced, it can be hard to accept that your spending habits need a complete overhaul. Don’t leave it until it’s too late to rectify the situation. Here are five signs that your personal debt is out of control.
You’re turning to payday loans for help
It can be easy to think that you will put off paying the odd bill for a month or two, when you have managed to put aside a bit of extra cash to pay for it. However, the chances are that if you can’t pay your bills now, you are even less likely to be able to do so in another couple of months. According to The Daily Mail, many people in the UK, panicking when they realise bills are way overdue and need to be paid, are turning to payday loan companies. These include QuickQuid and Wonga, which are regularly being advertised on television at the moment. The UK Office of Fair Trading is investigating claims that such companies are giving out loans without researching the borrowers’ ability to pay. As a result, borrowers are getting deeper and deeper into debt. If you are one of the many people turning to payday loans to pay your bills, stop before you get sucked in.
A large chunk of your income goes on your home
Investopedia.com suggests that if more than 28% goes on rent, mortgage, property taxes and insurance, you may be living beyond your means. Conservative lenders believe that paying out 28% or less on your home, then allows you enough disposable income to have a reasonable standard of living and to put some into a savings account too. A little bit more than 28% may not be a big deal, but if you are spending 50% or more, you could really be in trouble, because you will struggle to pay your bills, let alone have income left over for personal enjoyment and savings. If you are already in debt, you won’t be able to work your way out of it unless you move; if you aren’t yet in debt, you probably will be soon. Consider downsizing, or moving to a cheaper area, as soon as possible.
You can’t stop impulse buying
Everyone impulse buys occasionally and although it shouldn’t be encouraged, especially when the purchaser is in financial difficulty, it usually doesn’t make too much difference. However, if impulse buying becomes a regular thing, despite the fact you know you should be watching your budget, then you could be in real trouble. You need to treat yourself every now and again, but before you do so, make sure that you have paid all your bills and that the money you are spending is not earmarked for anything else. If you have the habit of putting purchases on credit cards, stop taking the credit cards out with you when you go shopping. If you take cash instead, you are less likely to go over your limit.
Low or non-existent savings rate
If you want to stay above the debt line, you need to be putting a certain amount of money aside each month to ensure that, if there is an emergency, you can pay for it without having to borrow. It can be easy to presume that, if you can just about manage to pay all your bills and buy groceries, you’ll be financially all right. However, you never know when something unexpected can happen and you need to know that you have a sum of money that you can fall back on. If you are unable to save at least 5% of your income and don’t have existing savings, then your financial situation is getting out of control. It is something that you need to rectify as quickly as possible.
You don’t have a budget
If you’re having financial issues, but don’t have a budget to keep too, then it is a definite sign that your personal debt is out of control. You should be aware of exactly how much you have to spend in any given month and should make a note of exactly how much you spend, whether you used a credit card or not. Ignoring your spending limits and hoping for the best is bound to lead you into hotter water eventually, if you aren’t already there. The British National Debt helpline website has a number of ideas for drawing up a budget, including templates that you can print out and use. Make good use of resources like that to help you on your way.
Don’t bury your head in the sand and hope your problems will go away; do something about them before they get even worse. Once you’re in serious debt, it can take you a long time to get out of it.