Are you managing your debt? Or is it managing you? If you're stuck in a money quicksand trap, you may not even realize at first that you're in a financial predicament, especially if you're sinking slowly and have been poorly managing your cash for a long time.1. You're spending more on your credit card than you're paying off. According to the National Foundation for Credit Counseling's 2014 Financial Literacy Survey, which surveyed 2,016 adults last March, about 1 in 3 U.S. adults admitted to carrying credit card debt from month to month. Approximately 15 percent of adults – more than 35 million – roll over $2,500 on credit cards from month to month.2. You're having trouble paying bills. It may be an obvious sign that there's a problem, but you still may not see it as a true red flag if you've been having trouble paying bills for a while. You may just see it as a sign that your salary is pitiful and your boss is a skinflint. That may be true enough, and if you aren't paying your bills on time, you certainly aren't alone: Twenty-four percent of Americans, according to the aforementioned survey, are constantly late with their bills. Still, if you're frequently paying late fees or getting burned by your bank's overdraft fees, that's generally a sign that you need to get your financial house in order before an emergency hits.3. Your retirement isn't being properly funded. It may not be troubling your bank account now, but it is a huge red flag for your future4. You're buying merchandise without putting much down. Have you ever driven a car away from a dealership without putting any money down or furnished your home while paying absolutely nothing? That could be a problem.5. You've created opportunities that could make you overextended. If you have a lot credit cards or lines of credit you rarely use, you could, in theory, end up spending a lot of money and getting yourself into trouble that way, but having those lines open isn't itself a bad sign. It's a sign that you have good credit, and your creditors trust you. Still, it's good to remember that if you aren't monitoring yourself, you could ultimately max out and find yourself buried in credit card debt. At least in that scenario, you have control over what may or may not happen.
This is extremely risky and generally not advised. Withdrawals incur taxes and penalties, and you permanently lose the future compound growth on that money, which is irreplaceable so close to retirement.
Act immediately. Ignoring it will make things worse. Contact your lenders directly. Many have hardship programs that can temporarily lower your payments or interest rate. Non-profit credit counseling agencies can also help you negotiate and create a debt management plan (DMP).
A DMP does not involve a new loan. Instead, it is a repayment arrangement facilitated by a third party. Debt consolidation involves acquiring new credit to pay off old debts. A DMP is often a better option for those who cannot qualify for a low-interest consolidation loan.
It is generally considered a last resort for individuals with significant unsecured debt who cannot qualify for a DMP or consolidation loan and for whom bankruptcy is not an option or is undesirable, though the risks are very high.
Use agencies approved by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Avoid debt settlement companies that charge high fees and make unrealistic promises.
