Many times, we don’t see the signs that indicate the need to secure financial services until it’s too late. Financial crisis doesn’t occur overnight, and there are several warning signs that indicate your debt problems may be getting out of control. Understanding if you may have a problem with your debts is the first step in taking action to get help. Too many families and individuals today are struggling with their debts and not even aware that they may have a debt problem. Below are some questions that will help determine if you’re in future financial danger and in need of financial services.
Do you find yourself exhausting savings as a way of supporting your debts? The purpose of savings is to have funds available for unexpected situations that may require additional financial resources. If you are exhausting savings to keep up with your expenses, it may be an indication that you are spending more than your salary can support and in need of financial services guidance.
Are you paying only minimum payments on your credit cards? If you can only afford minimum payments or not much more than minimum payments, you are overextended. It is crucial at this point to examine and properly adjust your financial budget and spending behavior. It is very likely if thrown into a situation that requires additional financial resources, your current monetary situation will be unmanageable.
Have you been declined credit or credit line increase? Being declined for credit is a clear indication that you need to re-evaluate your current financial situation. Creditors utilize guidelines that determine credit worthiness. I you’ve been “declined”, it means that your creditors feel that your finances exhibit signs of trouble.
After you pay your monthly credit cards, do you rack up as much or additional debt the following month? This is a definite sign that you are dependent on credit cards to maintain your life style or, to supplement day-to-day living expenses such as gas, meals, or food.
Do you avoid totaling up your outstanding debt? It’s important to be aware of where and what monies are owed to your creditors, and so, you must confront your spending behavior head on. Implementing a better repayment program and seeking financial services assistance and guidance before the situation becomes unmanageable is the first step to financial freedom.
Are your cards nearing or over your available line of credit? If the answer is yes, here’s another sign that you are in financial trouble and in need of financial services guidance. If you were mindful of your finances and understood how high your balance is your current situation could have been avoided.
Are you dependent on cash advances to pay on other credit obligations? If your answer is yes, your current income cannot support your style of life. You need to immediately stop to analyze your budget and make the necessary adjustments. Outside financial services assistance may be needed for guidance and structuring a payment program.
Do you float or bounce checks? Floating checks is a practice of issuing a check in hopes that by the time the check has cleared, money will be available in your account. Floating or bouncing checks is a clear indication that you’re living paycheck-to-paycheck and your finances are in trouble.
Do you get collection calls from creditors? Collection calls are a definite sign that you are behind on your credit obligations. Don’t avoid the problem. Start planning to become current again
Add to the list above:
- hiding bills and credit card statements from family members,
- depend on credit cards to support your lifestyle,
- took out a consolidation loan to pay off credit cards, but now have the credit card balances again,
- notice a reduction in your credit score
If you find you have yourself any of these issues, consider debt finding a true debt relief partner, let’s look at your debt to income ration, budget, and it is also worth your time to investigate your credit report.
Debt To Income Ratio
A debt to income ratio is the simplest method that a creditor or lender may use to compare the amount of your take home income with the amount of your overall debt, excluding your mortgage or rent payment. This will tell the creditor or lender what percentage of your take home income is being used to pay for non-mortgage related debt.
There are 3 parts to calculate your debt to income ratio.
Take Home Income: This is the amount your paycheck reflects after all your deductions. Take home pay can come from your job wages, sales commissions, company bonuses, alimony, child support, tips, interest on money, company dividends, social security, pensions and other government assistance. Below are 4 methods that can help you calculate your take home pay. – If you are paid weekly then you must multiply your weekly take home income by 52 then divide by 12. – If you are paid every other week then you must multiply your take home pay by 26 then divide by 12. – If you are consistently paid the same amount monthly then simply use that amount. -If you are paid a salary plus commissions that fluctuate up and down each month, the best way to calculate your monthly take home is to add up your take home salary with commissions over the last 12 months then divide by 12
Monthly Debt Payments: This is the amount you owe to your creditors each month, excluding mortgage, rent, utilities, and taxes. Monthly debt payments including – Credit card payments, Student loan payments, Auto or other vehicle loan payments, Bank or credit union loan payments, Medical or dental bills payments, Computer or electric items loans payments, Furniture or appliance items loans payments.
Debt to Income Ratio Formula: Take your calculated total (monthly debt payment) and divide it by your calculated total (take home income) and this will give you your debt to income ratio percentage.
Below is an example
- Monthly Take home pay – $2,000
- Monthly debt payments are – $700
- Take $700 divide by $2,000 = 35%
35% is your debt to income ratio.
Debt to income ratio above 35% you would be considered a high credit risk. Your chances of obtaining credit will be slim to none. At this ratio or higher creditors will consider that your take home income is not enough to support your current debt payments and monthly bills. So, let’s look at getting back on track with your budget.
Getting Back on Track – Budgeting for Those in Crisis (***)
Here at Nationwide Debt Reduction Services, we often hear from families that are in financial crisis every day. Many times there will be ineligible accounts for our program. Some have signed up with a credit-counseling agency and a few have already filed bankruptcy. However, even with additional assistance many still can’t seem to catch up and although their exact circumstances may be different, the general feelings are very much the same. Frustration, despair, and fear. Fear of possibly never being able to get back on track and live a better life. When that happens, how do you manage the remaining debt? This article was written for you. (And anyone else who is struggling to get back on track!)
However bad things may seem, everyone can get back on track. It may take several years of perseverance, dedication, humility, and hard work, but it can happen. Just as it is with many other difficulties we are presented with in life, there is no quick fix. We have to stick with it and persevere.
“When we long for life without difficulties, remind us that oaks grow strong in contrary winds and diamonds are made under pressure.” – Peter Marshall
If you’re trying to find a way to get back on track financially, here are
- No one’s budget will have these exact percentages; they are a guideline intended to be adjusted on the needs of each individual household.
Loans, Debts 5%
Everything you do (no matter how small it may seem to you right now), can make a difference. You can do this!
If you’re experiencing a monthly deficit (you’ve got more money going out each month than you have coming in), we’re here to help! Don’t give up on your finances, and don’t give up on BUDGETING. It may be the very process that shakes you up and helps you realize that you indeed need to make some serious changes in your life. Whether it’s earning more income, spending less money, or both.
Once you begin to create a budget that works for you, it will help you begin the process of really turning things around. Depending on how off track your finances are now, it could be life changing!
The changes that each family will need to make to get their budget balanced may be different, but one thing that will likely be the same is the need to take things one day at a time… ONE STEP AT A TIME.
Do You Have A Debt Problem?
Yes you do. It’s not a credit problem, it’s a debt problem. Now is the time to stop being overwhelmed by your bills. Stop struggling to make the minimum payments on your credit card accounts every month. Stop experiencing anxiety when you check your mail because have bills coming you know you cannot pay. Hand over all of those debt accounts that you’re beginning to lose track of. Let us talk to those collection agencies. Stop paying credit card bills with other credit cards. Stop living paycheck to paycheck with a minimal amount of savings in case of an emergency.
Managing your money well does not happen overnight. It is a process that can take many years to work through, but one that is well worth the extra effort, commitment and determination that it takes to succeed.
And all you have to do right now is begin. Get Relief from Credit Card Debt, Medical Bills, and Unsecured Loans. Find the Right Debt Relief Solution, Start with a FREE Debt Analysis Call Toll Free (888) 987-1325
Author bio: M. Thompson, a graduate of the University of Phoenix; has 20 years’ experience in Finance with 11 years in Debt Relief and understands how credit affects people’s lives. Learn more about debt consolidation alternatives through Nationwide Debt Reduction Services. Nationwide Debt Reduction Services is your preferred choice in debt relief.
You don't have to scream "get me out of debt" anymore, Nationwide Debt Reduction Services is listening.
Find the Right Debt Relief Solution, Start with a FREE Debt Analysis Call Toll Free (888) 987-1325