Four worrying signs that you might be overindebted

By Staff Writer

You keep overdrawing your checking account.

A bank checking account is like the proverbial canary in the coal mine when it comes to your personal financial picture. If you’re constantly overdrawing it – even once a month is a serious sign if it happens repeatedly – you need to get your financial act together. You’re likely spending too much money and possibly accumulating too much debt, or your income simply does not meet your expenses, in which case there are other forms of assistance to consider. Fix the problem by building a monthly budget and sticking to it.

 

Your credit card payments are dwindling.

If you can only afford to make the minimum payments on your monthly credit card bill (if that), you’ve got a borrowing problem. Credit card users keep paying interest on that big outstanding balance, and within a few months a $5,000 credit card tab can climb to $7,500. The solution? Use your card less (ideally, only for emergencies) and pay at least twice your minimum card payment. That should keep you out of credit card trouble.

 

Your emergency fund reads “zero.” If you don’t have an emergency fund, or the one you have is on life support, you’re courting big financial trouble. Experts historically say you should have at least six months’ worth of income stashed away in a savings fund, but it’s better to aim even higher. Build a 12-month cushion in case you lose your job or suffer from a major illness or injury. Most bankruptcies occur after a job loss or a serious health issue, so a proper emergency fund can save the day in that regard.

 

You have to choose which bills to pay. If two bills come in the mail and you can’t afford to pay both, you’re overstretched financially. If this happens once, no worries – it’s a tough economy and most people have problems with a bill at one time or another. But if it’s a monthly occurrence then you’re in “red flag” territory and need to revisit that budget and see where you can cut some meat off the bone (or take a second job to earn more income).

Recent Articles

Featured When should you invest rather than save?

Extra cash left at the end of the month? We have a look at the differences between saving and investing, and we find out how you should decide which one to pursue.

Investing for your retirement – which product to use?

Retirement annuities (RAs) and tax-free savings accounts (TFSAs) - which is better when planning for your retirement?

3 Reasons for early entry to a retirement village

Your parents may envision their golden years on the porch of your childhood home. However, it’s good to look at the benefits of joining a retirement village.

What do activist investors aim to achieve?

If you had the financial means to invest in a company so that you can enact the change you want to see in the world, would you do it? There is a growing group of individuals who would, and these are known as activist investors.


Latest Guide

Guide to debt rehabilitation solutions