Millions of Americans are in over their heads. How do you know if you are in financial trouble? If you are overextended with debts you can't pay back within 6 to 12 months (not including your mortgage or car payment), or if you spend more than 15 to 20 percent of your after-tax income on short-term credit purchases, you may be in financial trouble.
Do not, however, feel alone. It's not uncommon for even careful spenders to find themselves in debt. Some additional signs that you are financially overextended include:
- You would have an immediate financial crisis if you lost your job.
- You spend more than you earn.
- You must borrow to pay current bills.
- You pay for everyday expenses, such as groceries, by using savings or credit.
- You're paying the minimum amount, or less, due on your bills each month.
- You are being contacted by bill collectors.
- You can't avoid using credit during the holidays or for your children's birthdays.
- You're having problems in your relationships because of money problems.
These are signs that you need to change your spending habits. You may resist admitting you have a crisis because you think the problem will go away. However, you can't ignore the problem. It won't go away.
Check with your local Cooperative Extension office for classes about money management and getting out of debt.
We would like your feedback on this Personal Finance Frequently Asked Question.
