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.
A Qualified Domestic Relations Order (QDRO) divides retirement accounts during divorce. While not directly debt-related, early withdrawals to cover expenses can incur penalties and tax liabilities, worsening debt.
Assets include liquid cash (checking/savings accounts), investments (retirement accounts, brokerage accounts, crypto), real estate (use conservative market value), and valuable personal property (e.g., vehicles, jewelry). Only include items with significant and verifiable value.
Nonprofit credit counseling agencies provide advice and may offer a Debt Management Plan (DMP), where they negotiate lower interest rates with creditors and combine payments into one monthly amount, often with reduced fees.
Cultivating a mindset of living within your means. This means embracing contentment, distinguishing between needs and wants, and valuing long-term financial security over short-term material gratification.
Common mistakes include: creating an unrealistic budget that is too restrictive, forgetting to budget for irregular expenses (like car maintenance), and not including a small category for guilt-free spending, which leads to burnout.
