How Do I Know When I Have Too Much Debt?

As always, every situation is different and whether or not you are carrying too much debt depends on a number of variables in your individual circumstance.  What may be too much of a financial burden for you, may be completely manageable for someone else.

When investigating where you are at in your finances and how you are managing your debt load, the first thing you must prepare, is a detailed budget.  Why detailed? Because more often than not,  the small expenses are the ones we forget and sometimes when we “guesstimate” expenses, we end up guessing too low. Start by listing your monthly living expenses (rent, Hydro, phone, cable, internet, etc.).  Be realistic when you are calculating food, clothing.  A good way to calculate this is by keeping your receipts and putting them either down on paper, in a spreadsheet or in an accounting software. Don’t forget to think about annual expenses such as licence, insurance, school supplies, gifts, haircuts, vacations, holiday spending, etc.  Also, try to remember any unexpected expenses that may come up such as car or home repairs. Once you have everything written down and accounted for, deduct these expenses from your net income (your actual take home pay). The remaining amount is you have available to cover your debts (credit card payments, line of credits, etc).

Now simply do the math.  What do you get? Is there enough money to cover all of your expenses or are you short at the end of every month?

Along with preparing a detailed budget, there are warning signs that could be evidence of the fact that your debt has become unmanageable. These include:

• You can only pay the minimum payment on my credit card every month.
• You end up having to use your credit card to pay for essentials such as food, medications, etc.
• Once you paid your monthly payments, you are left with no extra money until your next pay period.
• You find that you are stressed just by opening my mail or answering the phone.
• Your accounts have been transferred to collection agencies.
• You receive regular phone calls from your creditors.
• The bank refuses to consolidate your debt.
• After your expenses and debt payments, you are unable to put money aside.

If you are currently struggling or see the signs coming, call us for a free consultation. We can help you address your financial situation and discuss what options are available to you.