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Are You Living Beyond Your Means?


Getting into debt is too easy these days. But how can you tell if you have too much debt and how to fix it? Here's the answer if you have money problems. Take this simple test to see if you have a debt problem and then read the answers for how to fix it.

In today's society, advertisements bombard us with offers that encourage us to Spend! Spend! Spend! With promises such as:

"Easy Credit!"

"Pre-approved loans!"

"3 years interest-free credit!"

"Free gift when you apply!"

Given the current "live for today" attitude, this can seem tempting to most Americans. But too much can be spent on luxuries, leaving not enough to pay the bills.

Certain kinds of debt may be appropriate, such as a mortgage or a car. Many people, however, try to buy more than they can afford. Indeed, banks and businesses encourage us to do so.

Credit cards can be too easy to obtain yet challenging to maintain, especially when people borrow from one card to pay off another.

Credit may even be advertised as free – but we still have to pay in the end. Many families can lose up to $1,000 a year in installment debts, resulting in a drop in their future standard of living. Families often live from paycheck to paycheck with little or no savings for emergencies.

In the US, personal bankruptcies have doubled in the last ten years. Most of these people had jobs, yet unexpected bills or reductions in pay caused their bankruptcy.

Many economists agree that a global recession is on its way.

During the past year, mortgages, auto loans, and overall debt all increased while student loan amounts decreased. Last year, the average American household had $222,000 in mortgage debt, $17,000 in credit card debt, and $29,000 in auto loans. Despite common misconceptions about credit card debt, according to a study analyzing household debt over the past year, many Americans are taking on debt to pay for necessities due to increasing prices and interest rates. The study found that the average U.S. household owed $58,000 in student loans, which was a decrease of 0.6% from the previous year. The study drew on various sources of data, including the Bureau of Labor Statistics and the Federal Reserve Bank of New York.

The amount borrowed from credit cards has more than doubled in the past four years. Debt is fine if you can afford the repayments. But what if you lost your job?

With current data, getting out of debt as soon as possible is still important to avoid interest payments. For example, if you have a credit card balance of $1,000 with an average interest rate of 16.28%, and you make only the minimum payment of 2% per month, it will take over 19 years to pay off the balance, and you will pay $1,644 in interest alone.

By doubling your payments to 6% per month, you can eliminate the debt in under three years, and you will only pay $463 in interest charges.

Savings can be gained by switching mortgages, and if you fix your interest rate for 2 or 3 years, then you can rest easy knowing what your repayments will be for the next few years. But make sure your mortgage is flexible so you can pay off more if you have some spare money.

Bank loans or hire purchase agreements can be trickier to pay off, as there may be penalties for early repayment. Just stick to the repayments and make sure that you don't get tempted into any more debt. Remember that covetousness (i.e., desiring what we see) = debt! This is because we often get into debt over what we want, not what we need.

There are warning signs to indicate whether you are heading for financial difficulties. Look at the following list of 10 signals. If anyone applies to you, it’s time to look closer at your budget.

If more than one applies, you could already be financially challenged:

  • · Using a credit card for purchases that you usually pay for with cash.

  • · Taking out loans to pay off debts.

  • · Paying only minimum amounts due on credit cards.

  • · Receiving "overdue" notices.

  • · Using savings to pay bills.

  • · Cashing in or borrowing from life insurance policies.

  • · Working overtime to make ends meet.

  • · Using your overdraft to pay bills

  • · Juggling debts and only paying the most demanding.

  • · Obtaining credit card cash advances for day-to-day living

If you're seriously concerned about overspending, the Consumer Financial Protection Bureau (CFPB) provides free debt information that can be helpful in managing your finances.


Once your debt is under control, prioritizing saving is important. A standing order directly into your savings account is a great option, as it ensures that a portion of your income is automatically saved each month along with your bills.

Always remember to avoid going into debt for things that won't significantly impact your life. For instance, do you really need to upgrade your computer or buy a new cell phone? And is a second car truly necessary or just an expensive convenience?

It's also important to scrutinize the minor expenses in your life. Do you really need to buy a cappuccino every time you pass a coffee shop, or could you make coffee at home and save money? Packing your lunch for work instead of buying it can save you significant money each month.

However, the most crucial thing to keep in mind when it comes to personal finance is to monitor your expenses regularly. Don't wait until your bank statement arrives and shocks you with unexpected charges. Remember the saying, "An ounce of prevention is worth a pound of cure."

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