When to worry about debt and what to do about it

Most people carry a balance on their credit cards. But when do you know that your credit card debt is approaching unmanageable territory? And what can you do about it?

Signs your debt load is running away from you

If it seems like your money is spent before your paycheque even hits your account, because you are spending a growing chunk of your income to pay your debts.  This is a sure-fire sign that things are getting out of control.

Also, if you are only making the minimum payment or if you are taking cash advances from one card to pay another, your debt cycle is quietly churning behind the scenes, and it’s time to stop it.

Stop spending

The very first step you need to take is to remove the temptation to spend. Take your credit cards out of your wallet and put them aside in your home for safekeeping.

It’s cash only from now on. Your debt will continue to grow until you pay it off, based on interest alone. You don’t need to add to the pile with more purchases.

Gather all your info

In order to develop a plan to pay down that debt, you’ve got to have the accurate information. Gather all of your bills as well as any other expenses.

Set a budget

Once you’ve got all of the information gathered, set a detailed budget that will cover your debt obligations. Identify areas in which you can cut back on unnecessary spending so that you’ve got more cash to put down on your debts.

If you haven’t already, put aside some money every month to go towards savings. That way, in an emergency, or for a larger purchase, you can leave your credit alone.

Pay it down faster

You have a few options to pay down your credit cards. You can either consolidate, either by doing a balance transfer to your lowest interest card, or you can visit your financial institution to get a consolidation loan. This will work if you have a good credit profile.

And then there is the Do-It-Yourself method, start by choosing your highest interest or lowest balance card first. There are benefits to both: choosing your higher interest card will save you in interest charges, where attacking your lowest balance first will motivate you to keep on going until you conquer your debt.