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7 signs you’re in debt over your head

Facing your debt is the first step toward

Facing your debt is the first step toward mastering it. Credit: Getty Images / Geber86

Sometimes the first sign of debt trouble is that you ignore the signs: You don’t know what your credit card balances are, for example, or you just don’t open statements.

But facing your debt is the first step toward mastering it.

Indicators that your debt is a problem:

  • Your credit card balances keep rising. It’s best to pay credit cards in full every month. Next best is paying enough to whittle down balances over time. If your balances are growing, your financial worries are, too.
  • At least one credit card is maxed out. There’s one exception: Don’t count a balance-transfer card you’re using for debt consolidation — provided you have a plan to pay it off while the interest rate is in the low introductory period.
  • You can’t pay more than the minimums on your credit cards.
  • You can’t afford to save for an emergency fund.
  • You’re late on bills because you didn’t have enough money on the due date.
  • You applied for credit and were rejected.
  • You’re getting offers for credit cards for people with damaged credit — and you thought you had good or excellent credit.

If any of these apply, it’s time to take an honest inventory of your debt.

Simply checking for these warning signs means you’ve taken the first step. If one or more apply to you, keep moving along this path to turn your situation around.

  • Take inventory: First, make a list of every debt you have, along with the interest rate and minimum payment. Then, list your income and expenses for each month to assess your financial obligations.
  • Cut ruthlessly: Find where you can trim expenses. Any extra money you can put toward debt payments will get you debt-free that much faster.
  • Do the math: Going all in, can you successfully pay off this debt? If it’s more than 50 percent of your income, bankruptcy may be a more reasonable path to re-establish at least modest financial health. Schedule a free consultation with a bankruptcy attorney and a nonprofit credit counselor.
  • Pick a plan: If a do-it-yourself approach is within reach, choose a repayment method you’ll actually use. Two popular ones:
  • Debt avalanche: Focus all extra payments on the debt with the highest interest rate until it’s paid, then move on to the next highest.
  • Debt snowball: Start with your smallest balance and work up to the largest. The early victories can keep you motivated.

Debt consolidation rolls several credit card balances into one debt at a lower interest rate. If you qualify for a balance transfer card or personal loan, it could help you pay off debt sooner and for less money overall. Track your progress and celebrate milestones, but don’t go overboard. Think picnic in the park rather than five-star restaurant meal.

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