7 Signs Your Debt is Spiraling Out of Control and How to Fix It

Last Updated: Jan. 25, 2018

Building up a large hoard of debt has quickly become the American way of life. Redecorating your home? Slap it on a 12 to 36-month 0% APR credit card. Buying a new car? Get an 84-month car loan to stretch those payments into smaller portions. Going on vacation? Relax first, and worry about paying it off later. Sound familiar?

Americans are so used to paying for everything with credit, that it’s almost unheard of to be debt-free these days. But, how much debt is too much?

It’s a slippery slope, and more often than not, one debt leads to another to another to another. While there’s nothing wrong with taking out a mortgage to buy a house, it’s a different ball game when you find yourself up to your eyeballs in letters from debt collectors. Here are 7 signs your debt is spiraling out of control, and how you can fix it.

1. You’re Barely Keeping Up with the Minimum Payments

If you’ve got more credit card debt than you can count, it’s likely that you might be struggling to pay down even the minimum amount, let alone anything extra. If this scenario rings true for you, you need to find a way to lower your monthly outgoing or earn some extra money – there’s really no way around it.

2. Your Debt is Growing Every Month

If you’re struggling with debt already, it’s time to stop swiping the plastic. Even if you can manage to pay down $600 of your credit card balance, it’s pointless if you boost your balance back up with an $800 purchase. Your debt will only continue to grow if you keep making purchases that you can’t afford. Stop spending immediately otherwise, your debt will start to spiral out of control.

3. Your Credit Score Has Taken a Hit

One of the factors that determine your credit score is called credit utilization. This is the amount you owe compared to your credit limit. For example, if you have a credit card with a $10,000 limit, but you have a balance of $6,000, your credit card utilization is 60%. Ideally, the lower your percentage, the better your credit score will be.

4. You’re Not Saving Any Money

If you aren’t able to save money, you’re not alone. In fact, according to Go Banking Rates, more than half of American households had less than $1,000 in savings in 2017. But, this is a risky way to live. Generally, you should have a fully-stocked emergency fund that will help you stay afloat in the event of job loss. You should have 3-6 months’ worth of expenses or at least $1,000 stashed away. If the debt is stopping you from having savings you need to change your financial outlook before it becomes a serious problem.

5. You’re Living Paycheck-to-Paycheck

If you need to wait until you get your paycheck to cover your bills every month, you might just be one step away from a financial crisis. Just one missed paycheck or financial mishap has the power to take away your ability to keep up with your bills.

6. Debt Collectors Are Calling You

If any of your debts are in collections, it sounds like things are getting out of control. You’ve already fallen behind with your monthly payments, and now you are debt collectors are calling your phone and might soon be knocking on your door. These circumstances will start dramatically affecting your credit score, so you need to find a way out.

7. You’ve Borrowed Money to Pay Your Bills

If you’ve borrowed money from friends and family to pay your bills, it sounds like you might be well in over your head. To start paying back everybody you owe money to, you need to make some drastic changes to your life.