Debt Problems

Debt problems have a tremendous impact on people's lives. They break up marriages. They cause untold stress. People have told us that they were close to suicide over their debt problems. It's serious stuff. More people have debt problems today than at any point in our history and the situation is probably going to get worse. Our government, our economy and many families have come to depend on debt to function financially.

The credit card companies constantly solicit us to get new credit. They constantly bombard us with advertising telling us to use credit for purchases of various types. Everyone has seen these ads. "Some things money can't buy, but for everything else..." "Don't leave home without it." "It's everywhere you want to be." "No payments, no interest for 1 year for qualified buyers." "If you apply for our credit card we can take 15% off your purchase." All of these things pound home the idea that we can have "the good life" if we have good credit and use it to the max. They paint the rosy picture that credit is your best friend. We, as a nation, generally do what the ads have been telling us to do for years - we use credit and we use it a lot. In general, the decision making process goes along the lines of, "Can I afford the monthly payments?" If the answer is yes, out comes the plastic or we sign the store credit agreement. For many people this seems to work. They have strong purchasing power thanks to their credit and they have a good credit score because they always pay on time.

What happens if your income is disrupted for any reason and you're not making what you were when you used the credit card or signed the loan agreement? That's when things get interesting. Many people will do anything to keep those credit card bills paid on time, including using up all of their savings, retirement funds and so forth. That's a problem. Those are irrational actions. People do them because they don't want to have bad credit. Your credit score is the hammer that your creditors will use to keep you in line and paying on time. If you start falling behind you will receive letters and phone calls telling you that your credit will be ruined if you don't make your payments. Oh really? So? Step back and look at it for a minute. Having a good credit score made it very easy for you to rack up lots of debt. Does it help you to deal with interruptions in your income? No. Will your creditors give you a break on your monthly payments when you've encountered a financial bump in the road because you have had good credit up to that point? No. The fact is that the biggest "benefit" of having a good credit score is that it is easier to get deeper in debt.

Over the last 10 plus years we have helped many people who were doing fine until they hit that financial bump in the road. They were carrying debt but they were able to make their payments so it was no big deal. That's another big problem with debt - you don't see the problem until it's too late. Based on years of experience we can say with complete certainty that the only items that should be paid over time with credit are cars and real estate. If you're carrying balances on credit cards, particularly if you're not putting money into savings on a regular basis, you have a debt problem. Those balances won't appear to be a problem until you experience a loss of income or some other financial calamity. The fact is, as many people have found out the hard way, there is no guarantee that you will continue to be employed. There is no guarantee that you won't get seriously ill or get in a serious accident that prevents you from working. Medical insurance can take care of the doctor and hospital bills but it can't take care of the loss of income. We've seen all kinds of things cause unexpected personal financial hardships that are completely independent of the state of the economy. When those things hit, the credit card payments are no longer affordable and the debt problem suddenly becomes very visible.

If you're wondering whether or not your debt is a problem, here are a few questions you can ask yourself to assess your own debt situation. The answers to these questions will tell you whether your debt is a problem and give you an idea of how severe your problem is if you have one.

• Are you paying more than the minimum payments on your credit cards, and taking your balances down steadily every month? If you answer no to this question, you have a debt problem. You are not retiring your debt and you leave yourself open to more severe problems should your income be interrupted in any way.
• Are your total credit card balances higher than your total savings, not including retirement funds? If the answer to this question is yes, you have a debt problem. You will not be able to pay off those credit cards from your savings should the need arise.
• Are your credit card balances staying pretty much the same every month or increasing? If you answered yes to this question and the next one, you have a debt problem.
• Are you paying the minimum payments on time every month but no more and not putting money into savings? If your finances are so tight that making the minimum payments on your debts and covering your basic expenses prevent you from saving you have a debt problem.
• Are you dipping into your savings to cover minimum payments? If so, you definitely have a debt problem. Your current income is insufficient to pay your debts.
• Are you using credit cards to pay credit cards? Are you putting basic expenses such as groceries, utilities, etc. on credit cards so you can make the monthly payments on your debts? If you're doing either of these things, you have a debt problem.
• Are you falling behind? This one is the obvious one. If you're falling behind on your payments, you have a debt problem. Most people don't consider they have a debt problem until they get to this point. They ignore all of the other signs of debt problems until it's too late.

If you have a debt problem, you need to act quickly before it gets worse. There are several approaches to getting out of debt. There isn't one solution that's right for everyone. You need to determine which solution is most appropriate for your situation and get started resolving your debt problem today!

See our Debt Relief page to find out about the different options for dealing with debt problems and get started!