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Do you want to have a new car, a new home, luxury vacations, a great wardrobe, a big screen TV and maybe some nice toys or expensive jewelry? Who doesn’t? There’s nothing wrong with having these things as long as you can afford them. But what if you want them now and you think you can “afford” the payments? That’s the million dollar question – when are you in over your head with too much debt? Even if you can manage your payments, at least for now, you may be heading for trouble. Here are a few ways to tell if you’re close to being maxed out or to being turned down the next time you want to borrow:

  1. You’re not sure how much debt you have

It doesn’t matter if you have R3, 000 in credit card debt that you can’t pay back or if you have R10, 000 that you can’t pay back. While one number is significantly higher than the other, if you don’t know how much debt you have, there’s a good chance you have too much. Even if you don’t have the funds to pay your debt off quickly, you should still pay attention to how much you have.

  1. All your money goes to paying off debt

Take a minute to calculate how much you spend on debt payments each month. Pull out your credit card statements and other financial reports, tally your minimum debt payments, and then compare this figure to your monthly income. In a perfect world, debt payments should not exceed 36% of your gross monthly income. But if you’re spending 50% or more on debt payments each month, it’s time to make some financial adjustments.

  1. You can only afford minimum payments

If you can barely afford the minimum payment on your credit cards; you’re likely carrying too much debt.

  1. You are stressed all the time

Too much debt often results in credit cards that are nearly maxed out. Furthermore, creditors can repeatedly call your home phone or cellphone if you’re behind on payments. The stress of not being able to keep up with payments can affect your sleep routine, happiness, appetite, and anxiety level. If you’re constantly thinking about your debt – or being reminded of your debt with collection calls – you’re probably carrying too much.

  1. You don’t have money to save

A comfortable nest egg is a sign of good personal finance management. This provides income after a job loss and cash for other emergencies. However, if you’re spending all your money on debt payments, there’s probably little left for savings.

Try starting off with a manageable 90-day trial period. At the end of that time, if you’ve made solid inroads and have negotiated your debt downward and you credit score upward, keep at it. If not, then it’s time to get some help.

 

Are you ready to Crush your Debt?

Crushing your debts is key to your financial success.The decision to get yourself out of debt is a life changer, if you are willing to make the necessary commitment that goes with that.

Join the Get out of Debt Challenge

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