Signs You Are Carrying Too Much Debt

Some of life’s necessities, like homes and arguably cars, cost more than most people can save in 5 or 10 years. This means they have to borrow money to be able to pay for their needs. Unfortunately, if you are like many Americans, you have probably borrowed money for things you want and cannot afford. The average American family carries more than $10,000 in high interest credit card debt. This is in addition to other loans like mortgages, car loans, student debt, and home improvement loans. It is important to spot signs you care carrying too much debt before the burden of interest rate payments starts eating into your savings and investments for retirement.

Are You Paying Down Your Debt?

If you are only able to make the minimum payments on your credit cards and other loans every month, it may take years to become debt free. If you are missing payments or just scraping by with the minimum payment, this is a sign of too much debt. A credit counselor may be able to help, or you may be able to negotiate with credit card companies for lower payments and interest rates. Companies will often alter interest rates and payment schedules for customers with a good payment history and credit score, but it is essential that you negotiate these terms before your credit dries up, your score is affected, or the company doesn’t want to lower their rates for you.

Another way to lower credit card interest and pay debt faster is to transfer balances to cards with 0% to 3% APR introductory offers on balance transfers. Look for cards with offers of 12 to 18 months of reduced interest on balance transfers which will give you time to make higher payments on balances without accruing interest. A low interest rate means that even if you continue to pay your current minimum payment, you will be paying more on the principal/balance so you can reduce the amount you owe, and therefore the interest payments, faster. However, don’t rely on transferring balances between companies – this is not a substitute for financial discipline and wise money management.

Have You Have Been Denied New Credit?

Carrying too much debtToo much debt can affect your credit score even if you make all your payments on time. Banks and other lenders look at both your credit score and your debt to income ratio when deciding whether to approve loans like mortgages. If your debt to income ratio is too high, meaning you would have difficulty paying additional debt, lenders will not approve new credit.

If a bank or other lender has rejected a loan application, they will send a letter explaining their reasons for denying your loan. The most common reasons are a poor credit score, unacceptable debt to income ratio and no credit history. While it is necessary to use some credit to establish a credit history and score, too much credit can make it difficult to get new loans, especially when those loans could be financing an investment opportunity that would contribute to your long-term financial security and wealth. Never let a new luxury car loan or excess spending impede your ability to take advantage of an investment opportunity.

If a high debt to income ratio is your problem, consider simultaneously lowering your debt while finding ways to increase your income. Like many financial bloggers explain, a side hustle can be crucial to meeting your future financial goals. You can research ways to make money from home, including freelancing, consulting, and teaching classes, or pick up a part-time job on the weekends, many of which offer health benefits that can save you thousands on premiums each year.

Does Every Paycheck Go Towards Paying Bills?

If everything you make is going toward paying off your debt, with very little or nothing left over, it is a sign that you are carrying too much debt. There should be some money left after paying monthly expenses like rent or mortgage payments, utilities, phone and groceries, for savings and small, unexpected costs called emergencies. If all the money left after paying your monthly expenses is going to pay credit card bills and other loans, you have too much debt.

No Savings

Financial experts counsel individuals to have at least 3 to 9 months expenses in a savings account to provide a safety net in case you lose your job or are injured and unable to work. This is in addition to retirement accounts and other savings and investments. Those with no savings or short term investments have to depend on personal loans, or worse, cash advance companies, if an emergency arises.

If you do not have enough left after paying creditors to put aside money for savings, consider taking a temporary part time job to help pay down debt and accumulate money for emergencies. Talk to creditors about reducing interest payments and start putting any extra money in a savings account or types of safe investments. The best advice is probably to change your spending habits. Avoid buying unnecessary items like expensive clothing, jewelry or the newest electronics until you have provided yourself with enough savings to cover emergencies.

Do You Pay Your Bills On Time?

If you do not pay your bills on time because you need to wait for another paycheck, you definitely should avoid overspending for a few months to catch up on your payments and avoid completely ruining your credit history. Living pay check to pay check is stressful and leaves no margin of error if you lose a job or even a day or two of work. Paying your bills after the due date costs more since most creditors and utility companies add a late fee as a penalty for late payments.

Talk to creditors about rescheduling due dates so you can make your payments more easily and try to consolidate and reduce as many payments as possible until you get your debt under control. Imagine how much happier you would be if you didn’t have financial stress to compound all the other obstacles in life you already face.

Is Your Debt Making You Sick?

If you are struggling with debt, you may be experiencing stress leading to physical and emotional illnesses like ulcers, depression, headaches, high blood pressure and heart attack. It may also be taking a toll on your personal relationships, especially your marriage. Financial problems are one of the leading causes of friction and arguments in marriages. It can also cause people to avoid friends and family because they are embarrassed by their financial difficulties or because they can no longer afford to participate in activities with their friends.

While getting your finances back on track will help alleviate many of the symptoms of stress, talking to family, friends and/or professional counseling can help you get back into the life you once enjoyed. You may be surprised to find that other people in your circle are not as prosperous as they seem, and the support of friends and family can help you through difficult times until you get out from under your debt.

Final Word

In America, debt has become a way of life for most families. Instead of trying to keep up with the neighbors, try paying off bills, putting money in savings and keeping debt to a minimum. You may not have a new luxury car, but you also will not have the large payments and the stress that goes with buying things you cannot really afford.

Original image credit: Carrying a heavy sack of potatos by canorus, on Flickr

World Diets: A Week’s Worth of Groceries

Ok, so I saw this post over at FStoppers about What a Week of Groceries Looks Like Around the World, and I couldn’t help but mark it for a second look, and eventually an article here.  Click on that link and go take a look.  Look at what each picture contains and then come back and see if you come to the same conclusion that I do.  I’ll wait.

Done?  Ok, first, let’s talk about some “givens” that I found to be somewhat ironic, simply because they also could be considered stereotypes.  I’ll start at the top.

  • Mexico: OMG, you guys like Coke!  
  • Germany: First thing I noticed was all the beer and wine right up front.
  • Italy: Lots of the expected breads and pastas
  • Japan: Fish, noodles, and rice.
  • Mali and Chad: That’s it?

Obviously, there are some things that we expect.  Countries like Mali and Chad that we’re hearing about starvation or near starvation like conditions in sometimes have an obviously lesser pile of food.  Japan is notorious for it’s high-fish diet.  And Germany.  Germany!  I suppose I can’t expect much else from the country of Octoberfest.

A couple of surprises.  I’m a little bit surprised by the lack of sausages in the Poland picture.  For the number of Polish sausages we eat here in the states that is.  (Ok, that’s kind of tongue in cheek.)

Now, let’s see if you noticed the same thing I noticed.  Every single country on that list eats way more fresh food than the American family.  Seriously. Look at that picture.  There’s a little section of it that’s got some produce (a couple of tomatoes, some onions, and some grapes), and another small section of fresh meat.  That’s it.  The rest looks to be processed and packaged foods.  The only other countries that appear to even be close are Canada, Great Britain, and Australia.  Which is funny.  In an ironic sad way.

All four of those countries are usually lumped together as “first-world” countries.  We’re rich!  We have everything we could ever want!  And somehow, every other country on that list eats better than we do…  Heck, let’s look at Mexico.  Most Americans tend to think of Mexico as a drug addled, gang run, hovel.  But, look at that food!  Fresh herbs right off the plant!  A whole table of fresh fruits and vegetables!  Same story for India, Bhutan, Guatemala, and Equador!

Why is it that we all think that produce is so expensive, but we’ll gladly pay $10 for a large pizza?  Or $10 for a burger and fries?  It also makes me wonder just how much of that food those people grow themselves.  It’s not that expensive to start a garden.  Heck, even a container garden will do.  We’re just getting ready to plant out our second season (see season one’s results) of container gardening.  So far, I’ve spent about $2 on seeds.  Buy a few pots, get some soil, and plant some plants.  Fresh produce!

I’ve gotten a bit ranty, but it amazes me how poorly we eat in our “rich” country.  You’d think we’d be smarter than that…


Creative, Frugal Mother’s Day Gift Ideas for Kids and Adults

Mother’s Day is right around the corner.  If you’re scrambling to find ways to show mom how much you love and care for her, don’t worry.  There are many ways you can do just that without breaking the bank or relying on the same old boring gift of breakfast in bed or dinner out.

Projects for Younger Children

I have one word for you–Pinterest!  Seriously, head over to Pinterest and just search “Mother’s Day Crafts.”  There are so many creative, frugal ideas to choose from.  Here are some of my favorites:

Hand print flower–Paint your little one’s palm, then press their palm down on paper.  Either paint or add flowers to the tip of each finger.  Your child’s hand makes the stem of the “flowers.”  Then, cut out paper to make a flower pot and glue that to the bottom of the hand print.  On the paper pot, write a message stating something your child loves about mom such as, “You make the best chocolate chip cookies,” etc.

Book mark–Does mom love to read?  Cut out a rectangular strip of construction paper, and then glue a small picture of each of your children on the front.  Laminate it; use a paper hole punch to make a hole in the top, and hang some yarn through the top.

Creative Frugal Mothers Day Gift IdeasGift Ideas for Adult Children

If you’re an adult, your mother probably has every consumer item she could want or need.  Instead of shopping and spending money on something she may or may not enjoy, why not go the non-consumer route.  Why not give mom a gift from the heart?

A letter–If you haven’t told mom lately how much she means to you, now is the time.  For instance, when I was in high school, my friend and I spray painted our biology teacher’s rocks in his front yard in the middle of the night.  Not the best idea, I know.  I felt so guilty, I woke my mom up at 2 a.m. to tell her.  She didn’t freak out or lecture me; she just told me that we’d need to clean it up in the morning.  I appreciate that she could stay so calm, but I’ve never told her that.  I’d include that in my letter and also all the ways she has helped me grow into the woman I’ve become.  (The spray painting days are long behind me!)

A gift of experience–If you do want to spend some money on mom, why not give her a gift of experience?  My grandma always wanted to ride a hot air balloon.  However, she was a child of the Great Depression and was extremely frugal.  Even in retirement, when she knew she’d have enough money for life, she couldn’t justify spending money on what she viewed as an extravagance.  Instead, her kids chipped in and got her a hot air balloon ride for Mother’s Day.  She talked about that gift for years.  It was one of her favorite experiences.

This Mother’s Day, take the time to plan something special for mom to show her how much you love and appreciate her.  Often, you just need to use some creativity, not money, to show mom how much she means to you.

What’s the best gift you ever gave your mom for Mother’s Day?