How to Stay Ahead of Your Debt Obligations

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How Much Credit Card Debt Do You Owe?

Staff Writer
September 06, 2017

One of the biggest threats to average Americans’ economic future is uncontrollable debt obligations. The average American household owes close to $140,000 in debt, U.S. consumers are now $3 trillion in debt, and $1 trillion of those obligations consist of credit card bills.

Sadly, many frugal and responsible people find themselves overwhelmed with debt obligations. Often because of circumstances beyond their control such as job loss, pay cuts, bad health, business failure, divorce and just plain bad luck.

Many of these people end up using 25% or more of their income to pay off debt. This often leaves them with little money to pay for essentials like food, and no savings to deal with emergency expenses such as car repairs.

How to Stay Ahead of Your Debt Obligations

Financial experts recommend that households spend less than 10% of income on debt obligations, but this is often impossible.

Fortunately there are ways that you can take control of your finances and overcome your debt obligations.

Avoiding Debt

The first and most important step in managing debt obligations is learning how to avoid it. This can be difficult, especially for those with limited incomes (but it is not impossible).

Here are some strategies you can learn that will help you avoid debt:

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  • Only Use Credit Cards for Emergencies
    The most important of these habits is to only use credit cards in emergencies. This might mean stashing the credit card in the drawer or only carrying one credit card around with you.
  • Cash is King
    Another good habit is to pay with cash whenever possible. Studies show that people are less likely to spend money when they use cash. You will also avoid spending money that you do not have by using this strategy.
  • Pay Bills On-Time
    Get into the habit of paying your bills on time to avoid late fees. Tools like automatic debit and online banking that lets you send out electronic payments can help with this.
  • Check All Accounts
    Check all of your accounts online on a weekly basis so you can avoid problems such as unauthorized payments. If you can pay more than the minimum balance on credit card accounts, do it because even $10 extra a month can help.
  • Save NOW!
    Start saving now and don’t use debt as an excuse not to save. Remember if you don’t have savings you’ll have to use credit cards in emergencies and get right back into debt.

Good Debt and Bad Debt

Most experts describe good debt is being used for a necessary item and having monthly payments you can afford. The debt should also be paid off in a reasonable time and have a low or realistic interest rate.

Good debt can include business loans used to buy equipment or supplies, student loans and mortgages. Mortgages can be good debt because real estate often increases in value over time.

Bad debt is often for items you do not need. It often comes with high interest rates, and cannot be paid off. Most experts consider credit cards and payday loans as bad debt. A car loan can also be bad debt because vehicles usually depreciate in value over time.

When Debt is a Problem

Disturbingly, many people have debt problems and don’t even realize it. They never get out of debt because their habits and lifestyles get them deeper and deeper into the hole.

The first step in dealing with a debt problem is to admit that you have one. You can tell if you have a debt problem by looking over your finances and searching for some telltale signs.

You might have a debt problem if more than 10% of your income is going to pay off debt. Another sure sign of debt trouble is not being able to pay your bills on time because you run out of money. If you’re not paying some debts because you need the money for other expenses, you definitely have a debt problem.

Other big signs of debt trouble include:

Stress from constant worries about money, and fights with loved ones over money, are also symptoms of a debt problem.

What Can You Do to Resolve a Debt Problem?

Debt problems can be solved if you are willing to tackle them head-on. Simple steps like increasing your income with a second job or reducing your spending can help.

Another step that you can take is credit counseling. Some credit counselors can help you get a debt management plan in place that can control your obligations. A similar solution is debt settlement or debt resolution whereby a debt-settlement company negotiates with your creditors for smaller payments.

Need More Help?

These solutions can help if you are willing to investigate them and devote the time and effort needed.

If you need more advice, call the experts at Student Debt Relief on 844-669-4407. Student Debt Relief has a long history of helping people manage their debt. Nobody has to live with a debt problem if they are willing to tackle it.

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